Top Story Security Related

FinCEn, OFAC, and the FBI have issued a joint notice to financial institutions, urging them to be vigilant in detecting, identifying, and reporting timeshare fraud perpetrated by Mexico-based transnational criminal organizations (TCOs). According to the FBI, since at least 2012, the Jalisco New Generation Cartel (CJNG) and other Mexico-based TCOs have increasingly targeted U.S. owners of timeshare properties in Mexico. Older adults, including retirees, are frequent victims in these schemes. The TCOs use proceeds from timeshare fraud to diversify their revenue streams and finance other criminal activities,
including the manufacturing and trafficking of illicit fentanyl and other deadly synthetic drugs into the United States.

The notice provides an overview of methodologies associated with these schemes and related financial typologies, highlights red flag indicators, and reminds financial institutions of their reporting requirements under the Bank Secrecy Act (BSA). In addition to filing BSA reports, financial institutions are critical partners in preventing their customers from becoming victims of timeshare fraud in Mexico, assisting those that become victims, and—in the case of older customers—reporting suspected elder financial exploitation to law enforcement, their state-based Adult Protective Services, and any other appropriate authorities.

The White House’s Office of Information and Regulatory Affairs has released its Spring 2024 Unified Agenda of Regulatory and Deregulatory Actions, or URA. This semi-annual report details each federal agency’s upcoming plans to issue or rescind regulations.

The Consumer Financial Protection Bureau’s agenda includes four proposed rule actions, addressing the Fair Credit Reporting Act, or FCRA, mortgage servicing, the Financial Data Transparency Act and consumer financial product contracts under Regulation AA. The bureau released last month the initial part of its FCRA rulemaking and a final rule regarding the attributes a standard-setting body must demonstrate in order to be recognized by the CFPB for purposes of the personal data rights rule; the Bureau plans to finalize the remainder of the proposed rule regarding personal data rights rule in October. The proposed rules for mortgage servicing were issued last week and the Regulation AA proposal is expected in September.

According to the URA, the CFPB projects it will release final rules on non-sufficient fund fees in October and on overdraft fees in January 2025.

On the BSA/AML front, FinCEN expects an August 2024 unveiling of its final AML/CFT rules applicable to investment advisers and certain real estate professionals. FinCEN reported an October target for its proposed revisions to the Customer Due Diligence rule, and is aiming for a May 2025 reveal of proposed rules on 314(b) information sharing protections.

The Small Business Administration yesterday announced $3 million in new funding under the Cybersecurity for Small Businesses Pilot Program. Three grants will be awarded to state agencies to provide training, counseling, and other tailored cybersecurity services for startups and emerging entrepreneurs.

Applications will be accepted from July 2–August 2, and applicants can apply for awards ranging from $1,000,000 to $1,045,000 for a performance period of 24 months ending September 2026.

Eligible applicants include state and territorial government agencies that seek to provide training, counseling, and other tailored cybersecurity services for startups and emerging entrepreneurs.

OFAC has released the second video in its “OFAC Basics” video series.

“My Funds Are Blocked, Now What?” provides viewers with guidance on what it means when funds are blocked in connection with OFAC sanctions, as well as recommended steps for what to do if their funds have been blocked.

Yesterday, FinCEN released a supplemental alert (FIN-2024-Alert002), highlighting five additional red flags regarding the financing of Israeli extremist settler violence against Palestinians in the West Bank.

FinCEN issued an alert (FIN-2024-Alert001) on February 1, 2024, to financial institutions related to the financing of Israeli extremist settler violence against Palestinians in the West Bank. This supplemental alert provides additional red flags to assist U.S. financial institutions in identifying and reporting suspicious activity related to the financing of this violence. Additionally, this alert requests that financial institutions continue to use the existing SAR code (FIN-2024-WBEXTREMISM) when submitting SARs specific to the financing of Israeli extremist settler violence in the West Bank and reminds financial institutions of their Bank Secrecy Act (BSA) reporting obligations.

Yesterday, the U.S. Department of State reported it has imposed sanctions on three individuals and five entities under Executive Order 14115 for being involved in violence or threats of violence targeting civilians, seizure or dispossession of property by private actors, or actions that threaten the peace, stability and security of the West Bank; or being owned or controlled by an individual designated under that order.

For the names and identification information of the designated parties, see this July 11, 2024, BankersOnline OFAC Update.

FinCEN has updated its Beneficial Ownership Information Frequently Asked Questions, adding three new Reporting Company questions (questions C.12 – C.14), and one new Beneficial Owner question (question D.17).

In related news, FinCEN has posted an alert on its Beneficial Ownership Information webpage concerning fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act.

OFAC has issued OFAC Guidance: Production Submission Standards, updating its former delivery standards. The new document provides technical and general guidance to persons submitting material to OFAC and applies primarily to persons providing responses to administrative subpoenas, requests for information, disclosures, and especially for submissions that may entail voluminous documentation (e.g., more than 100 pages).

On Wednesday, FinCEN reported that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), issued a public statement at the conclusion of its plenary meeting last month highlighting the growing financial connectivity of the Democratic People’s Republic of Korea (DPRK) with the international financial system, and reiterating the FATF’s concerns over the DPRK’s continued failure to address the significant deficiencies in its AML/CFT regime and the serious threats posed by the DPRK’s illicit activities related to the proliferation and financing of weapons of mass destruction. In order to protect the international financial system, the FATF continues to urge all jurisdictions to remain vigilant to these risks and calls for renewed implementation and enforcement of countermeasures against the DPRK.

The FATF also updated its lists of jurisdictions with strategic AML/CFT/CPF deficiencies. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

On June 28, 2024, the FATF added Monaco and Venezuela to its list of Jurisdictions Under Increased Monitoring and also removed Jamaica and Türkiye from the list.

The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same, with Iran, DPRK, and Burma subject to calls for action. Iran and DPRK are still subject to the FATF’s countermeasures, while Burma is still subject to the application of enhanced due diligence, but not countermeasures.

On Monday, the Federal Reserve Board announced it had fined Silvergate Capital Corporation and Silvergate Bank $43 million for deficiencies in Silvergate's monitoring of transactions in compliance with anti-money laundering laws.

The action was taken in coordination with an action by the Department of Financial Protection and Innovation of the State of California, the state supervisor of Silvergate. The penalties announced by the Board and state total $63 million. The U.S. Securities and Exchange Commission separately announced a penalty against Silvergate Capital Corporation.

Silvergate separately announced last year that it was voluntarily winding down its operations, and has now paid back all deposits to its customers.

• Consent order of assessment of civil money penalty