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03/27/2024

CFPB joins federal and state agencies in coordinated statements

The CFPB on Tuesday reported it has joined federal and state agencies in releasing agency-specific action statements on tech capacity. These statements reflect concrete actions to increase tech capacity, including actively hiring technologists, that will help enforce the laws on the book and design remedies that work for consumers, workers, small businesses, and others in the digital era.

The Bureau released a statement from CFPB Director Rohit Chopra and Chief Technologist Eric Meyer and a statement from the Federal Trade Commission.

03/26/2024

OFAC sanctions Russian companies and Chinese hackers

Yesterday, the Treasury Department reported that OFAC had sanctioned thirteen entities and two individuals for operating in the financial services and technology sectors of the Russian Federation economy including persons developing or offering services in virtual assets that enable the evasion of U.S. sanctions. Five entities were designated for being owned or controlled by OFAC-designated persons.

Treasury also reported that OFAC had sanctioned Wuhan Xiaoruizhi Science and Technology Company, Limited (Wuhan XRZ), a Wuhan, China-based Ministry of State Security (MSS) front company that has served as cover for multiple malicious cyber operations. OFAC also designated Zhao Guangzong and Ni Gaobin, two Chinese nationals affiliated with Wuhan XRZ, for their roles in malicious cyber operations targeting U.S. entities that operate within U.S. critical infrastructure sectors, directly endangering U.S. national security.

For the names and identification information of all the designated parties, see the March 25, 2024, BankersOnline OFAC Update.

03/21/2024

OCC opens registration for Project REACh summit on financial inclusion

The OCC has announced that registration is open for its Project REACh Financial Inclusion Summit on May 29-30, 2024, at its headquarters in Washington, D.C.

The OCC’s Project REACh, or the Roundtable for Economic Access and Change, brings together leaders from the banking industry, national civil rights organizations, business, technology, and community development to identify and reduce specific barriers that prevent underserved and minority communities from full, equal, and fair participation in the nation’s economy.

Registration is required to attend the Summit and is open until May 15, 2024, or until full, whichever occurs first. For security reasons, attendees will be subject to screening and must present a valid government-issued identification to enter the building.

The Summit will be recorded, and the video will be posted to OCC.gov.

Information on how to register to attend the Summit and the agenda are available on the Summit's webpage.

03/21/2024

FHFA housing finance techsprint

The Federal Housing Finance Agency has announced its second TechSprint, an in-person team-based problem-solving event hosted by its Office of Financial Technology. The FHFA’s Generative Artificial Intelligence (AI) in Housing Finance TechSprint will bring together technology, regulatory, housing, and consumer finance experts to identify use cases (or specific scenarios) and associated control measures to support the responsible use of generative AI in the housing finance system.

The TechSprint will begin on Monday, July 22, in Washington, D.C. The event consists of three days of intensive, in-person collaboration. FHFA will select participants from the applicant pool and place individual participants into TechSprint teams that reflect a diverse set of experiences and expertise. Teams will then work on select problem statements that address the central question: “How might the responsible use of generative AI promote a transparent, fair, equitable, and inclusive housing finance system, while fostering sustainable homeownership and rental opportunities?” The event will culminate in a Demo Day exhibition on Thursday, July 25, when the teams will present their innovative ideas to an independent panel of judges drawn from experts in government, industry, nonprofits, and academia for evaluation and potential recognition.

03/19/2024

Two investment advisers charged for false and misleading statements

The Securities and Exchange Commission has announced settled charges against two investment advisers, Delphia (USA) Inc. and Global Predictions Inc., for making false and misleading statements about their purported use of artificial intelligence (AI). The firms agreed to settle the SEC’s charges and pay $400,000 in total civil penalties.

According to the SEC’s order against Delphia, from 2019 to 2023, the Toronto-based firm made false and misleading statements in its SEC filings, in a press release, and on its website regarding its purported use of AI and machine learning that incorporated client data in its investment process. For example, according to the order, Delphia claimed that it “put[s] collective data to work to make our artificial intelligence smarter so it can predict which companies and trends are about to make it big and invest in them before everyone else.” The order finds that these statements were false and misleading because Delphia did not in fact have the AI and machine learning capabilities that it claimed. The firm was also charged with violating the Marketing Rule, which, among other things, prohibits a registered investment adviser from disseminating any advertisement that includes any untrue statement of material fact.

In the SEC’s order against Global Predictions, the SEC found that the San Francisco-based firm made false and misleading claims in 2023 on its website and on social media about its purported use of AI. For example, the firm falsely claimed to be the “first regulated AI financial advisor” and misrepresented that its platform provided “[e]xpert AI-driven forecasts.” Global Predictions also violated the Marketing Rule, falsely claiming that it offered tax-loss harvesting services, and included an impermissible liability hedge clause in its advisory contract, among other securities law violations.

Without admitting or denying the SEC’s findings, Delphia and Global Predictions consented to the entry of orders finding that they violated the Advisers Act and ordering them to be censured and to cease and desist from violating the charged provisions. Delphia agreed to pay a civil penalty of $225,000, and Global Predictions agreed to pay a civil penalty of $175,000.

03/19/2024

Two lenders fined $59M; falsely promised fast PPP application processing

The Federal Trade Commission yesterday reported it has taken action against two companies – Biz2Credit and Womply – that made false promises to small businesses seeking to take part in the Paycheck Protection Program (PPP), delaying and sometimes preventing them from obtaining funds they needed to keep their businesses afloat during the COVID-19 pandemic.

The companies have agreed to settle the FTC’s charges against them: Biz2Credit will pay $33 million and Womply will pay $26 million to the FTC for small businesses harmed by their deceptive conduct. These are the largest damages amounts ever secured by the agency under Section 19 of the FTC Act, and include money consumers lost because of the companies’ conduct, even if consumers made no payments directly to the companies.

Biz2Credit, Inc., and its subsidiary, Itria Ventures, have agreed to pay $33 million in damages to settle the Commission’s charges that they deceptively advertised that consumers’ emergency PPP loan applications would be processed in an average of 10-14 business days when, in reality, the average processing took well over a month. The FTC’s complaint alleges that Biz2Credit’s application processing was riddled with delays, and the average processing time was double what the defendants claimed, with tens of thousands of consumers waiting more than two months for a final determination. Even though they were aware of these delays, the defendants continued to make their false timing claims to consumers until nearly the end of the program. The FTC’s complaint also says that Biz2Credit unfairly ignored many consumers’ repeated and urgent pleas to withdraw their loan applications. As a result, the defendants delayed and sometimes even prevented these consumers from obtaining PPP funds elsewhere.

[UPDATE Mar. 26, 2024: A spokesperson for Biz2Credit provided a statement regarding its settlement with the FTC saying, in part, that "Biz2Credit demonstrated to the FTC that its 12-14 business day average processing time estimate for PPP loans was accurate for all bona fide PPP loan applications. Fraudulent and ineligible applications, which took longer to process, were included by the FTC in its calculations. Biz2Credit carefully reviewed and ultimately declined applications that it determined were potentially fraudulent or ineligible under PPP program rules. ... Biz2Credit’s decision to enter into the FTC settlement was a pragmatic business decision given the cost and uncertainty of litigation. There was no admission of wrongdoing by Biz2Credit in the settlement."]

Womply and its CEO, Toby Scammell, have agreed to pay $26 million to settle FTC charges they preyed on small businesses in desperate need of PPP funding. The FTC’s complaint alleges they widely advertised that small businesses – particularly one-person businesses like gig workers – could successfully get PPP funding when they applied through Womply. The complaint charges, however, that more than 60 percent of Womply applications never resulted in funding. Womply and Scammell allegedly also advertised that their automated processes and good customer service would help small businesses secure PPP loans fast. In fact, applicants regularly faced significant issues that slowed down or fully hindered their applications and were often unable to receive customer service assistance they were promised, according to the complaint.

03/15/2024

OCC Office Hours in San Francisco announced

The OCC has announced its Office of Financial Technology (OFT) will hold Office Hours in San Francisco, May 21-22, 2024, to promote responsible innovation in the federal banking system.

Office Hours are one-on-one meetings with OCC’s OFT staff to discuss financial technology (fintech), new products or services, partnering with a bank or fintech company, or other matters related to responsible innovation in the federal banking system. OCC staff will provide feedback and respond to questions. Each meeting will be scheduled for 50 minutes.

Information on how to request a meeting is available on the OCC's Office Hours Event page. To be considered, submit a request by March 30, 2024. The OCC will provide specific meeting times to selected participants following a review of all requests.

03/15/2024

Fed and OCC fine JPMorgan Chase $348.2M for inadequate monitoring

The Federal Reserve Board yesterday announced it has issued an enforcement action against JPMorgan Chase & Co., and fined the firm approximately $98.2 million for an inadequate program for monitoring firm and client trading activities for market misconduct. The Board's action requires JPMorgan Chase to review and take corrective action to address the firm's inadequate monitoring practices, which occurred between 2014 and 2023.

The Board's action was taken in coordination with the Office of the Comptroller of the Currency. The penalties announced by the Board and the Office of the Comptroller of the Currency total approximately $348.2 million.

The OCC's assessment of a $250 million civil money penalty against JPMorgan Chase Bank, N.A. was also announced yesterday. The OCC reported it found that the bank operated with gaps in trading venue coverage and without adequate data controls required to maintain an effective trade surveillance program.

Generally, trading venues are systems or electronic platforms, operated by investment firms or market operators, that bring together multiple third party buying or selling interests in financial instruments to perform a transaction. The OCC expects banks to perform trade surveillance to monitor the market conduct of its traders and clients as part of its market conduct risk control framework. The OCC found that the bank failed to surveil billions of instances of trading activity on at least 30 global trading venues. These gaps and deficiencies in the bank’s trade surveillance program constitute unsafe or unsound banking practices.

03/13/2024

Hsu discusses operational resilience

The OCC has reported that Acting Comptroller Michael J. Hsu yesterday discussed the importance of operational resiliency in remarks at the Institute of International Bankers Annual Washington Conference.

In his remarks, Mr. Hsu discussed the growing risks of disruptions that may impede the provision of financial services or adversely impact systems. He also discussed considerations to strengthen operational resiliency requirements for large banks with critical operations, including third party service providers.

03/08/2024

FTC issues extends telemarketing fraud protections to businesses

The Federal Trade Commission has announced a final rule extending telemarketing fraud protections to businesses and updating the rule’s recordkeeping requirements in light of developments in technology and the marketplace. The Commission also announced a proposed rule that would provide the agency with significant new tools to combat tech support scams.

The final rule will be effective 30 days after publication in the Federal Register with compliance with one provision delayed until 180 days after publication.

There will be a 60-day comment period on the proposed rule following its Federal Register publication.

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