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Compliance Alert - February 2016

Financial Crimes Enforcement Network (FinCEN)

Geographic Targeting Orders issued.

On January 13th, the Financial Crimes Enforcement Network (FinCEN) issued Geographic Targeting Orders (GTOs) that will temporarily require certain U.S. title insurance companies to identify the natural persons behind companies used to pay “all cash” for high-end residential real estate in Manhattan, New York City as well as in Miami-Dad County, Florida. FinCEN is using its risk-based approach to combat money laundering in the real estate sector. The GTOs are effective from March 1, 2016 through August 27, 2016.

Advisory issued for AML/CFT deficiencies.

On January 19th, FinCEN issued an advisory on the Financial Action Task Force-(FATF-) identified jurisdictions with Anti-Money Laundering/Counter-Terrorist Financing (AML/CFT) deficiencies. The FATF has called upon its members, including the United States, to impose countermeasures and consider the risks arising from these AML/CFT-deficient jurisdictions. FinCEN, in its advisory, urged financial institutions in the U.S. to apply enhanced due diligence.

FDIC

Office of Foreign Assets Control (OFAC)

OFAC takes on cybersecurity issues.

The Office of Foreign Assets Control (OFAC) published regulations to implement Executive Order (EO) 1934, which was issued in April of 2015. The EO, “Blocking the Property of Certain Persons Engaging in Significant Malicious Cyber-Enabled Activities,” creates a new, targeted authority for the U.S. government to better respond to significant cybersecurity threats, particularly in situations where malicious cyber actors may operate beyond the reach of existing authorities. 

Hezbollah sanctioned.

On January 7th, OFAC singled out a key Hezbollah support network by designating a financier who has received millions of dollars from Hezbollah to invest in commercial projects supporting the group. The action continues the Treasury’s ongoing efforts to target Hezbollah and its supporters. As a result of the action, all assets of those designated that are based in the U.S. or in the possession or control of U.S. persons have been frozen, and U.S. persons are generally prohibited from engaging in transactions with them.

California company to pay $140,400 settlement.

A company based in Irvine, California, along with its subsidiary, has agreed to pay $140,400 to settle potential civil liability to alleged violations of the Cuban Assets Control Regulations. OFAC determined that the company did not voluntarily disclose the apparent violations and that they constitute a non-egregious case. Both the statutory maximum civil monetary penalty and base penalty amounts for the apparent violations totaled $260,000.

FDIC

Federal Deposit Insurance Corporation (FDIC)

December enforcement actions published.

On January 29th, the Federal Deposit Insurance Corporation (FDC) released a list of orders of of administrative enforcement actions taken against banks and individuals in December. In total, there were 41 orders and one notice issued. 

Comments sought on how small banks are assessed.

The FDIC issued a revised proposed rule to amend the way small banks are assessed for deposit insurance. According to the press release issued on January 21st, the proposed rule would affect banks with less than $10 billion in assets that have been insured by the FDIC for at least five years by updating the data and revising the methodology that the FDIC uses to determine applicable risk-based assessments. 

List of banks examined for CRA compliance issued.

At the beginning of January, the FDIC issued its list of state nonmember banks evaluated for compliance with the Community Reinvestment Act (CRA). The list covers evaluation ratings that the FDIC assigned to institutions in October 2015.

OCC

Office of the Comptroller of the Currency (OCC)

$49 million in civil money penalties assessed.

On January 5th, the Office of the Comptroller of the Currency (OCC) terminated mortgage servicing-related consent orders against two financial institutions and issued civil money penalties (CMPs) against the banks for previous violations of the orders .These CMPs included $48 million assessed against one bank and $1 million against the other. The penalties will be paid to the U.S. Treasury.

Enforcement actions and terminations released.

On January 15th, the OCC released its list of new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. These lists are released regularly and include all Cease and Desist Orders, CMPs, and Removal/Prohibition Orders.

Dodd-Frank stress test scenarios released.

At the end of January, the OCC released economic and financial market scenarios to be used in the upcoming 2016 stress tests for covered institutions with more than $10 billion in assets. These include baseline, adverse, and severely adverse scenarios, as described in the final rules implementing the Dodd-Frank Act of 2010.

SEC

Securities and Exchange Commission (SEC)

FAST Act implemented.

The Securities and Exchange Commission (SEC) announced the approval of interim final rules regarding provisions of the Fixing America’s Surface Transportation (FAST) Act. The FAST Act revised financial reporting forms for emerging growth and smaller reporting companies.

Whistleblower awarded over $700,000.

The SEC announced a $700,000 award to a company outsider who conducted a detailed analysis that led to a successful SEC enforcement action. The whistleblower was commended for his voluntary submission of high-quality analysis. The whistleblower program at the SEC has awarded over $55 million to almost two dozen whistleblowers since the program’s inception in 2011.

Corporation to pay $2 million for misstated financials.

On January 20th, the SEC announced that a mortgage servicer agreed to pay a $2 million penalty after an investigation determined that the company inaccurately disclosed to investors that it independently valued these assets at fair value under U.S. Generally Accepted Accounting Principles (GAAP). As a result, the company misstated its net income for 2013 into 2014. 

CFPB

Consumer Financial Protection Bureau (CFPB)

Public feedback south on mortgage lending information guidelines.

On January 7th, the Consumer Financial Protection Bureau (CFPB) announced that it had begun seeking public feedback regarding the resubmission of mortgage lending data reported under the Home Mortgage Disclosure Act (HMDA). This hearkens back to the October publication of a final rule updating the reporting requirements of HMDA regulations.

Car dealer to pay $800,000 in penalties and restitution.

The CFPB announced action taken against a buy-here pay-here used card dealer for abusive financing schemes, amongst other alleged crimes including misleading consumers and hiding auto finance charges. The dealer is required to pay $700,000 in restitution to harmed consumers, with a suspended civil penalty of $100,000.

CFPB monthly snapshot released.

On January 28th, the CFPB released their monthly snapshot examining consume complaints concerning financial services that run the gamut from debt settlement and check cashing to money orders and credit repair. The report highlighted the prevalence of fraud and consumer concern with reliable customer service.

NCUA

National Credit Union Administration (NCUA)

Restitution of almost $60,000 ordered.

The National Credit Union Administration (NCUA) announced a prohibition order in late December preventing an individual from participating in the affairs of any federally insured financial institution. The individual was ordered to pay restitution in the amount of $54,595.21 after pleading guilty to charges of embezzlement and false pretenses.

Partnership to help low-income credit unions.

The NCUA and the U.S. Treasury Department’s Community Development Financial Institutions Fund have entered into a partnership whose agreement will help to streamline the application process for low-income credit unions to become certified as Community Development Financial Institutions. 

CUSO Registry announced.

The NCUA announced that credit union service organizations (CUSOs) have 60 days, between February 1 and March 31, to register with the NCUA’s CUSO Registry, the new online system for CUSOs to report their operational and financial information directly to the agency. As part of the launch, the NCUA will host a free webinar on February 11th

FED

Federal Reserve Bank

First enforcement action of the year announced.

On January 7th 2016, the Federal Reserve Board announced the execution of the enforcement action against Covenant Bancgroup in Alabama. The full list of 2016 enforcement actions, as well as past enforcement actions, can be found on the Federal Reserve’s website.

Dodd-Frank stress test scenarios released.

Along with the OCC, the Federal Reserve Board has released supervisory scenarios for the 2016 Comprehensive Capital Analysis and Review (CCAR) and Dodd-Frank Act stress test exercises. Furthermore, the FRB and OCC have issued instructions to firms with assets over $10 billion participating in CCAR. As the guide states, the Dodd-Frank Act requires the Board of Governors of the Federal Reserve System to conduct annual supervisory stress tests of bank holding companies (BHCs) with $50 billion or greater in total consolidated assets. 

FRB extends comment period for proposed rules.

The Federal Reserve Board announced extensions for the comment period for two proposed rules: the first, a rule to strengthen the ability of the largest domestic and foreign banks operating in the U.S. to be resolved without extraordinary government support or taxpayer assistance, was extended until February 19th. The second, a proposed policy statement detailing the framework the Board would follow in settling the Countercyclical Capital Buffer (CCyB), was extended until March 21. 

FED

Department of Justice

Five residents to pay almost $4 million for mortgage fraud scheme.

On January 12th, the Department of Justice’s (DOJ’s) Office of Public Affairs announced that five Michigan residents were sentenced to prison for their roles in a multi-year mortgage fraud conspiracy. The residents were ordered to pay restitution in varying amounts totaling $3,566,408, in addition to prison times ranging from one day to 33 months in prison.

Human trafficker sentenced to life in prison.

A woman behind a Houston sex trafficking ring has been sentenced to life in federal prison following conviction on January 20th. This is a landmark sex trafficking case, and one of the most significant in scope and magnitude to be tried to a verdict of guilty. The woman was convicted on all counts – conspiracy to commit sex trafficking, conspiracy to harbor aliens, aiding and abetting to commit money laundering and conspiracy to commit money laundering.

Individual to pay $2.55 million for Ponzi scheme.

The DOJ announced that the CEO of purported real estate development firm The George Group was sentenced to 108 months in prison for his role in a $2 million investment fraud scheme. The CEO, a former NBA player, was also ordered to pay $2.55 million in restitution. A forfeiture money judgment of $2.55 million was also entered.

Others

Other Regulatory Bodies

Lenders to pay $4.4 million to settle deception charges.

On January 5th, the Federal Trade Commission (FTC) announced charges against two payday lenders for illegally charging consumers with undisclosed and inflated fees. Each lender paid $2.2 million and collectively waived $68 million in fees to consumers that were not collected.

Three home loan modification companies charged with FHA violations.

On January 12th, the U.S. Department of Housing and Urban Development announced that it was charging three California home loan modification companies and their agents with violating the Fair Housing Act. Allegedly the companies were targeting Hispanic homeowners for illegal or unfair loan audit and loan modification assistance.

Goldman Sachs announced $5.1 billion settlement.

On January 14th, Goldman Sachs Group Inc. agreed to a $5.1 billion civil settlement with regulators concerning faulty mortgages. The settlement will resolve claims stemming from the marketing and selling of faulty securities to investors. According to a Bloomberg article, Goldman Sachs will pay a $2.39 billion civil penalty, make $875 million in cash payments and provide $1.8 billion in consumer relief under an agreement in principle with a U.S. task force. 

Compliance Alert - January 2016

Financial Crimes Enforcement Network (FinCEN)

FBAR filing postponed.

The Financial Crimes Enforcement Network (FinCEN) has extended the filing deadline for the Report of Foreign Bank and Financial Accounts (FBAR) to April 15, 2017. This extension applies to the reporting of signature authority held during the 2015 calendar year. For all other individuals with an FBAR filing obligation, the filing due date remains June 30, 2016.

Enforcement action leads to \$650,000 settlement.

On December 17, 2015, FinCEN announced its settlement with a “card club” gaming establishment, the Oaks Card Club of California. The club admitted to violating the program and reporting requirements of the Bank Secrecy Act (BSA). FinCEN required Oaks to pay a fine of $650,000 for willful violations, including inaccurate and misleading anti-money laundering (AML) policies and reporting requirements.

FinCEN provides documents on Customer Due Diligence (CDD).

On December 23rd, FinCEN announced the availability of two documents that are part of the Customer Due Diligence Requirements for Financial Institutions Proposed Rulemaking: A Regulatory Impact Assessment (RIA) and an Initial Regulatory Flexibility Analysis (IRFA). These documents are available on FinCEN’s site for viewing.

$200,000 CMP assessed for AML violations.

FinCEN announced the assessment of a $200,000 civil money penalty against a precious metals business for willful violations of the Bank Secrecy Act’s (BSA’s) federal anti-money laundering (AML) laws. The business failed to adequately assess its risks and did not conduct due diligence on its highest risk customers.

FDIC

Office of Foreign Assets Control (OFAC)

Boko Haram leaders sanctioned.

At the beginning of December, the Office of Foreign Assets Control (OFAC) added two Boko Haram leaders to its Specially Designated Global Terrorists (SDN) List. Individuals added to the SDN List are blocked and U.S. persons are generally prohibited from dealing with them. 

Burma general license issued.

On December 7th, OFAC issued a six-month general license to authorize activities that would otherwise be prohibited with regard to Burma.  General licenses allow all US persons to engage in the activity described in the general license without needing to apply for a specific license. This is General License Number 20, “Certain Transactions incident to Exportation to or from Burma.”

SDN List updated with North Korean leaders.

The Treasury Department’s OFAC announced the designation of several individuals and entities with ties to North Korea’s weapons proliferation network to OFAC’s SDN List. OFAC’s action against six individuals and three entities is designed to counter attempts to circumvent U.S. and UN sanctions, prevent the North Korean Government from accessing the U.S. financial system, and maintain the effectiveness of U.S. sanctions on individuals and entities that are linked to North Korea’s procurement of weapons of mass destruction (WMD)-related materials and proliferation activities.

Los Chatas designated per Kingpin Act.

In December, OFAC designated the criminal subgroup known as Los Chatas, which operates under the umbrella of Colombian criminal group La Oficina de Envigado (La Oficina) and is based in Bello, Colombia. OFAC designated La Oficina as a Specially Designated Narcotics Trafficker pursuant to the Kingpin Act on June 26, 2014.

FDIC

Federal Deposit Insurance Corporation (FDIC)

List of banks examined for CRA compliance issued.

On December 3rd, the Federal Deposit Insurance Corporation (FDIC) issued its list of state nonmember banks recently evaluated for compliance with the Community Reinvestment Act (CRA) in September 2015. 

Bank to pay $4.3 million for unfair and deceptive practices.

On December 23rd, the FDIC announced a settlement with a Delaware bank for unfair and deceptive practices in violation of Section 5 of the Federal Trade Commission (FTC) Act. The bank will pay a civil money penalty of $3 million and restitution of about $1.3 million to harmed consumers. 

Banks to pay $31 million for FTC Act violations.

The FDIC announced settlements with Utah and Connecticut banks for deceptive practices in violation of Section 5 of the FTC Act. The Connecticut bank will pay a civil money penalty of $2.23 million and the Utah bank a civil money penalty of %1.75 million, and together will pay a total restitution of approximately $31 million to almost one million harmed consumers.

November enforcement actions announced.

At the end of December, the FDIC issued a list of enforcement actions taken against banks and individuals in November. There are a total of 23 orders listed, including consent orders, removal and prohibitions orders, Section 19 orders, and civil money penalties. 

OCC

Office of the Comptroller of the Currency (OCC)

OCC charges bank CEO with unsafe banking practices.

The Office of the Comptroller of the Currency (OCC) announced a public hearing on OCC enforcement actions against the president, chief executive officer (CEO), and director of a Maryland bank. The OCC alleges that the CEO engaged in violations of law and regulation, unsafe or unsound banking practices, and breaches of fiduciary duty in his role at the bank, and is seeking a civil money penalty of $250,000.

Enforcement actions issued.

On December 18th, the OCC released new enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. The list includes civil money penalty orders leveled against Florida, Ohio, and Rhode Island banks

Third quarter trading revenue at $5.3 billion.

Insured U.S. commercial banks and savings associations reported trading revenue of $5.3 billion in the third quarter of 2015, a drop of 4% or $200 million from the previous second quarter, according to the OCC report issued on December 21st. Trading revenue in the third quarter was $300 million or 5%lower than in the year earlier period.

SEC

Securities and Exchange Commission (SEC)

Fraud charges against investment advisory firm announced.

An investment advisory firm was accused of investing clients in certain bonds with a hidden financial benefit to a broker-dealer connected to the firm. Reportedly the firm invested more than $43 million of client funds in illiquid funds, according to the fraud charges announced by the Securities and Exchange Commission (SEC).

Man charged with violations of antifraud provisions.

On December 15th, the SEC announced charges against a New Jersey man for illicitly pocketing $13 million from an elaborate pump-and-dump scheme, in violation of the federal securities laws antifraud provisions. The complaint seeks a permanent injunction and other financial penalties.

Martin Shkreli charged with violating Securities Act and committing fraud.

On December 17th, the SEC announced charges against Martin Shkreli, the former CEO of the pharmaceutical company Retrophin. He was charged with committing fraud by misappropriating money from two hedge funds he founded. 

Wealth management subsidiaries to pay $267 million for disclosure failures.

The SEC announced a settlement with two J.P. Morgan wealth management subsidiaries, who agreed to pay $267 million and admit wrongdoing regarding their failure to disclose conflicts of interest to clients. In a parallel action, J.P. Morgan Chase Bank agreed to pay an additional $40 million penalty to the U.S. Commodity Futures Trading Commission (CFTC). 

Traders to pay almost $1 million to settle insider trading charges.

On December 28th, the SEC announced that two China and Hong Kong traders agreed to pay more than $920,000 to settle an insider trading case levied against them. Allegedly the two men traded health care company stocks based on nonpublic information about impending acquisitions by private equity firms.

CFPB

Consumer Financial Protection Bureau (CFPB)

Credit reporting company to pay $8 million for illegal practices.

On December 3rd, the Consumer Financial Protection Bureau (CFPB) took action against a nationwide credit reporting company for illegally obtaining consumer credit reports and by failing to appropriately investigate consumer disputes. The company is required to pay an $8 million penalty to the CFPB for violations of the Fair Credit Reporting Act (FCRA).

Debt collection firm to pay over $2.5 million in refunds and penalties.

The CFPB filed a federal complaint against a Massachusetts debt collection firm, for reporting and collecting on old cellphone debt that consumers disputed and were not verified by the firm. If entered by the court, the proposed consent order would require the firm to overhaul its debt collection practices, refund at least $743,000 to consumers, and pay a $1.85 million civil money penalty.

Lender to pay $10 million for illegal debt collection practices.

On December 16th, the CFPB took action against a small-dollar lender for allegedly visiting consumers illegally at their homes and workplaces, empty threats of legal action, lying about consumers’ rights, and exposing consumers to bank fees through unlawful electronic withdrawals. The lender was ordered to refund $7.5 million and pay $3 million in penalties.

Auto dealer to pay $6.4 million civil money penalty.

The CFPB took action against an auto dealer and its affiliated financing company for providing damaging, inaccurate consumer information to credit reporting companies. The companies were ordered to cease illegal activities and pay a $6,465,000 civil penalty.

TILA/HMDA adjustments issued.

The CFPB issued two final rules regarding annual threshold adjustments for the Home Mortgage Disclosure Act (HMDA) and the Truth in Lending Act (TILA). The asset-size exemption for banks, savings associations, and credit unions will remain at $44 million. As a result, these institutions with assets of $44 million or less as of December 31, 2015, are exempt from collecting HMDA data in 2016. In terms of TILA, the asset-size threshold exemption for certain creditors will decrease from $2.060 billion to $2.052 billion for 2016; these creditors with assets of less than $2.052 billion (including assets of certain affiliates) as of December 31, 2015, that also meet other requirements of Regulation Z will be exempt from the requirement to establish escrow accounts for higher-priced mortgage loans in 2016.

Law firm penalized for operating an illegal debt collection lawsuit mill.

On December 28th, the CFPB filed a proposed consent order to resolve a lawsuit against a Georgia-based law firm for operating an illegal debt collection lawsuit mill. If approved by the court, the order would require the firm and its principals to pay $3.1 million for the CFPB’s Civil Penalty Fund.

NCUA

National Credit Union Administration (NCUA)

Proposed rule published to amend chartering and membership rules.

On December 10th, the National Credit Union Administration (NCUA) published proposed rule 80 FR 76747, recommending amendments to its chartering and field of membership rules. These amendments would implement changes in policy affecting the definition of communities, the expansion of multiple common bond credit unions, and more. Comments on the proposal are being accepted through February 8, 2016.

Financial firm to pay $225 million to settle claims.

The NCUA announced a settlement with Morgan Stanley for $225 million to resolve claims arising from losses related to corporate credit unions’ purchases of faulty residential mortgage-backed securities. Net proceeds from this settlement and others are used to pay claims against the failed corporate credit unions, including those of the Temporary Corporate Credit Union Stabilization Fund. 

Final IOLTA rule published.

The NCUA published a final rule amending its share insurance regulations to implement statutory amendments to the Federal Credit Union Act resulting from the recent enactment of the Credit Union Share Insurance Fund Parity Act. The amendments are effective January 27, 2016. 

FED

Federal Reserve Bank

Final rule issued concerning Board's revised capital framework.

On December 4th, the Federal Reserve Board issued a final rule providing information about how to apply the Board's revised capital framework issued in June 2013 to depository institution holding companies that are not organized as traditional stock corporations. The final rule, which becomes effective July 1, 2016, is generally similar to the proposed rule, issued in December 2014.

Firm ordered to pay $26 million for deceptive practices.

On December 23rd, the Federal Reserve Board assessed a civil money penalty and a consent order to cease and desist against a Connecticut institution. The order requires the firm to provide restitution of approximately $24 million in fees and pay a civil money penalty of over $2 million. 

Rates updated for Regulation A.

On December 23rd, the Federal Reserve Board published a final rule amending Regulation A (12 CFR Part 201) to increase the rate for primary credit at each Federal Reserve Bank. The secondary credit rate at each Reserve Bank automatically increased by formula as a result of the Board's primary credit rate action. These amendments were effective December 23, 2015. Rate changes for primary and secondary credit were applicable on December 17th

FED

Department of Justice

Hospitals to pay over $28 million for False Claims Act violations.

On December 18th, the Department of Justice announced that it had reached settlements with over 130 hospitals totaling approximately $105 million to resolve allegations that they mischarged Medicare for kyphoplasty procedures, following the announcement that thirty-two hospitals agreed to pay the United States more than $28 million to settle False Claims Act violations.

Airline to pay $2.8 million to settle Federal Aviation Administration safety violations.

In December an airline settled a lawsuit alleging that the company had violated Federal Aviation Administration (FAA) safety regulations in the maintenance of its Boeing 737s. The airline agreed to pay a $2.8 million civil penalty and up to $5.5 million in deferred civil penalties if it does not implement the operational changes set forth in the settlement agreement.

Chemical distributor to pay $1.5 million in penalties.

The Department of Justice announced that a chemical distributor pleaded guilty to illegally storing hazardous waste and to illegally transporting hazardous waste. As part of the settlement, the company agreed to pay $1 million in criminal fines for these violations as well as $250,000 to fund environmental community service projects and a $250,000 penalty to settle alleged violations of improper hazardous waste storage.

Others

Other Regulatory Bodies

New loan limits announced.

On December 9th, the Federal Housing Administration (FHA) announced the new schedule of loan limits for 2016, effective through the end of the year. Due to changes in housing prices, the maximum loan limits for forward mortgages increased in 188 counties, while there were no areas with a decrease in the maximum loan limits.

FTC charges settled regarding risky consumer payment card information placement.

A hotel and resort chain agreed to settle Federal Trade Commission (FTC) charges concerning the company’s security practices. The company will be required to establish a comprehensive information security program designed to protect cardholder data – including payment card numbers, names and expiration dates.  In addition, the company is required to conduct annual information security audits and maintain safeguards in connections to its franchisees’ servers.

Company to pay $100 million to settle FTC deceptive advertising charges.

On December 17th, the FTC announced a $100 million settlement with a company that violated the terms of a 2010 federal court order requiring the company to secure consumers’ personal information. 

Egmont Group mobilizes global membership against terrorist financing.

On December 23rd, the Egmont Group issued a notice reaffirming its commitment to fighting global terrorism, citing the recent terrorist acts in Turkey, Egypt, Labanon, Mali, and France. The notice recognized leading global organizations dedicated to Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) for meeting to discuss the terrorist threat to peace and prosperity on December 12th.  

Compliance Alert - December 2015

FDIC

Federal Deposit Insurance Corporation (FDIC)

FDIC releases October enforcement actions.

The FDIC released a list of orders of administrative enforcement actions taken against banks and individuals in October. The list included 15 orders of administrative enforcement actions taken against banks and individuals. The full list can be found here​.

Swap margin rule finalized.

The Federal Reserve Board (FRB), the FDIC, the Office of the Comptroller of the Currency (OCC), the Federal Housing Finance Agency (FHFA), and the Farm Credit Administration (FCA) issued a final rule to establish capital and margin requirements for swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants regulated by one of the agencies. For more information, see here​.

FDIC issues final rule concerning securitization safe harbor.

On November 24th, the FDIC issued a final rule revising certain provisions of it securitization safe harbor rule, which relates to the treatment of financial assets transferred in connection with a securitization or participation. The rule takes effect on January 25th, 2016. For more information, visit the Federal Register​

OCC

Office of the Comptroller of the Currency (OCC)

CRA evaluations released.

The Office of the Comptroller of the Currency (OCC) and the FDIC released their monthly lists of financial institutions recently evaluated for compliance with the Community Reinvestment Act (CRA).  More information on these can be found here​.

CRA enforcement actions and terminations released.

On November 20th, the OCC released recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with national banks and federal savings associations. The full list can be found here​.

OCC issues Disclosure Rule guidance.

On November 6th, the OCC issued guidance regarding the initial examinations of OCC-supervised institutions for compliance with the TILA-RESPA Integrated Disclosure Rule. The guidance applies to national banks and federal savings associations with $10 billion or less in total assets. More information can be found here​.

Fees and assessments for 2016 announced.

The OCC issued a bulleting informing all relevant financial institutions of fees and assessments to be charged by the OCC for calendar year 2016, effective January 1st. There will be no inflation adjustment to assessment rates. For more information on the bullet, visit the OCC’s website here.

SEC

Securities and Exchange Commission (SEC)

Permanent injunctive relief sought against Bitcoin mining companies.

On December 1st, the SEC announced charges against two Bitcoin mining companies for conducting a Ponzi scheme in which the owner sold $20 million worth of purported shares in a digital mining contract that misled investors. For more information on the case, see the SEC’s website here.

Bank to pay $4.2 million to settle SEC charges.

On November 30th, the SEC announced charges against a financial institution for failing to disclose certain payments in connection with debt issued by the Government of Tanzania in 2013. The financial institution agreed to pay a $4.2 million penalty as well as to admit the facts underlying the charges. For more information on the case, visit the SEC’s website.

Audit firm to pay $4.5 million for ignoring red flags.

The SEC announced charges against a national audit firm and two of its partners. The firm was charged with ignoring red flags and fraud risks while conducting deficient audits of two publicly traded companies that wound up facing SEC enforcement actions for improper accounting and other violations. More information can be found here.

Traders accused of spoofing and mismarking.

On December 3rd, the SEC announced fraud charges against traders, accusing them of circumventing market structure rules during options trading schemes and engaging in manipulative trading known as spoofing to generate liquidity rebates from an options exchange. For more information on the case, visit the SEC’s website.

CFPB

Consumer Financial Protection Bureau (CFPB)

Lender ordered to pay $3.28 million.

In late October, the CFPB ordered Security National Automotive Acceptance Company (SNAAC) to refund or credit $2.28 million to servicemembers and other consumers who were allegedly harmed by the lender’s illegal debt collection practices. The lender was also ordered to pay a penalty of $1 million. Thousands of people were victims of the company’s aggressive tactics.

Fall 2015 rulemaking agenda published.

The CFPB published a semiannual update of its rulemaking agenda as part of the government’s Unified Agenda of Regulatory and Deregulatory Actions. The agenda includes rulemaking actions in pre-rule, proposed rule, final rule, long-term, and completed stages. The CFPB published a blog detailing current initiatives and goals on November 20th.

Complaint filed against online lender for deceptive practices.

On November 18th, the CFPB announced that it had taken action against an online lender for deceiving consumers about the cost of short-term loans. The CFPB is seeking redress for harm consumers, as well as a civil money penalty and injunctive relief. Allegedly, the company unfairly used remotely created checks to debit consumers’ bank accounts. 

Dollar thresholds announced for Regulations Z and M.

On November 25th, the Federal Reserve Board and the CFPB announced the dollar thresholds in Regulation Z and Regulation M, for Truth in Lending and Consumer Leasing respectively, that will apply for 2016. The protections that apply to both generally will apply to consumer credit transactions and consumer leases of $54,600 or less in 2016, the same thresholds that applied in 2015. 

Thresholds announced for higher-priced mortgage loan appraisal requirements.

The CFPB, the Federal Reserve Board, and the OCC announced that the threshold for exempting loans from special appraisal requirements for higher-priced mortgage loans during 2016 will remain $25,500, effective January 1, 2016.

NCUA

National Credit Union Administration (NCUA)

NCUA offers resources on cybersecurity.

The NCUA have added another resource to help credit unions evaluate their ability to address cyber risks: a video that provides an overview of how the Federal Financial Institutions Examination Council’s cybersecurity assessment tool works. The tool can help credit unions pinpoint strengths and weaknesses in their cybersecurity programs, and is essential in today’s increasingly interconnected world.

NCUA launches redesigned website.

Early in November, the NCUA’s public website was relaunched with improved navigability and a mobile-responsive design. The hope is that users will be able to find critical information more easily. Some improvements include a new Small Credit Union Learning Center and a new consumer section. 

Consumer Assistance Portal opens.

On November 12th, the NCUA announced the opening of the Consumer Assistance Center online portal, which the NCUA hopes can help resolve consumer complaints more efficiently. The portal can be used by credit unions to receive correspondence about complaints concerning them, to send responses and complaint information, and to check the status of complaints. 

FED

Federal Reserve Bank

Bank to pay $258 million for violating U.S. sanctions.

On November 4th, the Federal Reserve Board announced a $58 million penalty and consent cease and desist order against a Germany-based bank for violating U.S. sanctions. New York’s Department of Financial Services is levying a $200 million penalty on the lender for similar allegations. The German bank allegedly used “nontransparent methods and practices” to process over $10.8 billion for financial institutions in countries subject to U.S. economic sanctions.

Written Agreement enforcement action entered.

In November, the Federal Reserve Board announced that the Federal Reserve Bank of New York and the New York State Department of Financial Services (NYSDFS) had entered into a November 5, 2015, Written Agreement enforcement action with the Bank of Nova Scotia, Toronto, Canada and Bank of Nova Scotia New York Agency. This agreement is to address deficiencies relating to risk management and compliance with applicable laws. 

Proposed rule issued to strengthen banks in the U.S.

In later October, the Federal Reserve proposed a new rule that would strengthen the ability of the largest domestic and foreign banks operating in the United States to be resolved without extraordinary government support or taxpayer assistance. The proposed rule would apply to domestic firms identified by the Board as global systemically important banks (GSIBs) and to the U.S. operations of foreign GSIBs.

Regulation D updated for 2016.

The Federal Reserve announced its annual indexing of two amounts used to determine reserve requirements of depository institutions. According to the final rule issued, the new low reserve tranche and reserve requirement exemption amount will apply to the fourteen-day reserve maintenance period that begins January 21, 2016.

Board updates Volcker Rule FAQs.

In November, the Federal Reserve Board posted an update of its Frequently Asked Questions concerning the Volcker Rule. The Rule generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund.

FED

Department of Justice

Wells Fargo to pay $81.6 million.

On November 5th, the Department of Justice (DOJ) entered into a national settlement agreement with Wells Fargo Bank requiring millions in remediation for the bank’s repeated failure to provide homeowners with legally required notices. The bank acknowledged that it failed to timely file more than 100,000 payment change notices (PCNs) and failed to timely perform more than 18,000 escrow analyses. 

Attorneys sentenced and ordered to pay $14 million for fraud scheme.

The DOJ announced that the manager of a home health company responsible for a $50 million fraud scheme in New Orleans was sentenced to prison and ordered to pay $14,147,275 in restitution. Allegedly the manager assisted with the payment of illegal kickbacks to patient recruiters and submitted false claims to Medicare to the tune of over $50 million. 

University to pay almost $20 million to settle allegations.

On November 20th, the DOJ announced that the University of Florida agreed to a $19.875 million settlement after allegations that the university improperly charged the U.S. Department of Health and Human Services (HHS) arose. Allegedly, the university misused grant funds awarded by the HHS as well as inflated costs charged to HHS grants awarded. 

Medical equipment company ordered to pay $1.96 million in restitution.

The DOJ sentenced a Texas man to 63 months in prison for his role in a $3.4 million scheme to defraud Medicare. The man was also ordered to pay $1.96 million in restitution. The man allegedly oversaw a scheme to defraud Medicare by submitting millions in false and fraudulent durable medical equipment (DME) claims.

Alabama woman to pay over $7 million in restitution.

A woman from Alabama was sentenced to over seven years in prison for her role in a stolen identity refund fraud (SIRF) conspiracy. The woman was also ordered to pay restitution in the amount of $7,173,704. Allegedly, in the scheme, participants filed more than 8,000 false tax returns fraudulently claiming more than $20 million in federal income tax refunds. 

Others

Other Regulatory Bodies

OFAC adds to SDN lists.

In November, the Office of Foreign Assets Control (OFAC) announced that it had designated four individuals and one entity with connections with the North Korean Government and North Korea’s weapons proliferation efforts. As part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.

HUD issues final rule concerning Section 108 fee.

On November 3rd the Department of Housing and Urban Development (HUD) published a final rule to permit HUD to collect fees from Section 108 borrowers to offset the credit subsidy costs of Section 108 loan guarantees. The rule was effective on December 3. 

Bank to pay $139,500 in OFAC penalties.

The Department of the Treasury announced a $139,500 settlement with Banco do Brasil, S.A., New York Branch ("BBNY") for seven apparent violations of § 560.204 of the Iranian Transactions and Sanctions Regulations, 31 C.F.R. part 560 (ITSR).

NYDFS considering new cybersecurity regulations.

In light of recent breaches of cybersecurity measures, the acting Superintendent of Financial Services for the State of New York has sent regulators a notice that the New York State Department of Financial Services is considering potential new cybersecurity regulations for the financial center. 

OFAC ends Liberia program, adds TCO and Burundi sanctions.

The U.S. Department of the Treasury announced that an Executive Order (EO) has been signed closing OFAC’s Liberia Sanctions Program as of November 12th. The EO also announced the designation of two money laundering organizations under its Transnational Criminal Organizations program. Then, on the 23rd, the President signed an EO “Blocking Property of Certain Persons Contributing to the Situation in Burundi.” OFAC lists all recent enforcement actions in its Resource Center which is available online.

Telemarketing Rule amended.

On November 18th, the Federal Trade Commission (FTC) announced final amendments to its Telemarketing Sales Rule (TSR) to ban payment methods used by scammers. The change will help protect consumers from fraud by prohibiting four types of payment methods. The TSR changes will hopefully stop telemarketers from “dipping directly into consumer bank accounts.”

Gender Identity Rule proposed.

The Department of Housing and Urban Development announced a proposed rule, the “Equal Access in Accordance with an Individual’s Gender Identity in Community Planning and Development Programs Rule (Gender Identity Rule).” This was created after HUD reviewed the Equal Access Rule published in 2012, which ensures that housing assisted or insured by HUD  is open to all eligible individuals and families without regard to actual or perceived sexual orientation, gender identity or marital status.  

Compliance Alert - November 2015

FDIC

Federal Deposit Insurance Corporation (FDIC)

CRA evaluations released.

On October 2nd, the FDIC issued its list of state nonmember banks evaluated for compliance with the Community Reinvestment Act, as well as the ratings they received. More information on these can be found here.

Updates made to Money Smart Financial Education Program.

The FDIC announced two new resources tailored to meet the financial education needs of individuals with visual disabilities. The resources give consumers the opportunity to learn how to better manage their resources. For more information, visit the FDIC’s Money Smart page.

Final rule on swap margin requirements issued.

On October 22nd, the FDIC approved a final rule to established margin requirements for swap not cleared through a clearinghouse. The rule does not apply to swaps of financial institutions with $10 billion or less in total assets that enter into swaps for hedging purposes. More information on the rule can be found here

Proposed rule issued to increase deposit insurance fund to statutorily required level.

The FDIC adopted a proposal to increase the Deposit Insurance Fund (DIF) to the statutorily required minimum level of 1.35 percent. The rule will impose on banks with at least $10 billion in assets a surcharge of 4.5 cents per $100 of their assessment base, after making certain adjustments. More information on the rule can be found here.

OCC

Office of the Comptroller of the Currency (OCC)

OCC releases CRA evaluations.

At the beginning of October, the OCC released a list of Community Reinvestment Act (CRA) performance evaluations that became publish during the month of September. The list only contains national banks, federal savings associations, and insured federal branches. For more information, visit the OCC’s website.

Mortgage performance continues to improve.

According to the OCC’s second quarter data from eight national banks, first-lien mortgages continue to improve from a year ago. Reports showed that 93.8 percent of mortgages included in the report were current and performing at the end of the quarter, compared with 92.9 percent a year earlier. For more information on the report’s findings, see here.

Enforcement actions and terminations issued.

The OCC reported that all Cease and Desist Orders, Civil Money Penalty Orders, and Removal/Prohibition Orders were issued with the consent of the parties, unless otherwise indicated as a Decision and Order issued by the Comptroller of the Currency. For more information, see the OCC’s website here.

SEC

Securities and Exchange Commission (SEC)

Company to pay more than \$14 million in settlement.

On October 6th, the Securities and Exchange Administration announced that Bristol-Myers Squibb, a pharmaceutical company, agreed to settle charges that its joint venture in China made cash payments and provided other benefits to health care providers at state-owned and state-controlled hospitals in exchange for prescription sales. For more information on the case, please visit the SEC’s website.

Two executives charged for accounting failures.

The SEC announced charges against two former executives for accounting failures at a seller of computer memory storage and power supply devices. The complaint alleged that the executives tried to materially inflate revenues and gross margins. For more information on the case, please visit the SEC’s website.

Agency to pay $19.5 million to settle charges.

On October 13th, the SEC announced charges against one of the largest issuers of structured notes in the world for making false or misleading statements and omissions in offering materials provided to U.S. investors in structured notes linked to a proprietary foreign exchange trading strategy. For more information, visit the SEC’s website here.

Enforcement actions taken against six firms, including $2.5 million in monetary sanctions.

In mid-October, the SEC announced enforcement actions against six firms. These actions included more than $2.5 million in monetary sanctions and, in the case of one previously sanctioned firm, an order barring the firm from participating in stock offerings for a period of one year for violations of Regulation M. For more information on the transgression, visit the SEC’s website.

SEC enforcement results announced.

At the end of October, the SEC announced that in fiscal year 2015, it filed 807 enforcement actions covering a wide range of misconduct, and obtained orders totaling approximately $4.2 billion in disgorgement and penalties. The agency's cases during the year included the first action involving a Foreign Corrupt Practices Act (FCPA) action against a financial institution. For more information, visit the SEC’s website here.

CFPB

Consumer Financial Protection Bureau (CFPB)

CFPB proposes to ban arbitration clauses.

On October 7th, the Consumer Financial Protection Bureau (CFPB) announced that it was considering proposing rules to ban consumer financial companies from using “free pass” arbitration clauses to block consumers from suing in groups to obtain relief. The proposal would allow consumers to pursue litigation in court and deter companies from wrongdoing. More information can be found here.

HMDA rule finalized.

On October 15th, the CFPB finalized a rule to improve information reported about the residential mortgage market. The rule would update the reporting requirements for the Home Mortgage Disclosure Act (HMDA) regulation. The rule will help to improve the quality and type of HMDA data. For more information, visit the CFPB’s website here.

Company ordered to pay $3.28 million.

On October 28th, the CFPB filed an administrative order against an automotive acceptance company specializing in loans to servicemembers. Allegedly the company engaged in illegal debt collection practices and was ordered to refund or credit about $2.28 million to servicemembers and other consumers, as well as pay a penalty of $1 million. For more information visit the CFPB’s website here.

NCUA

National Credit Union Administration (NCUA)

Barclays Capital to pay \$325 million to resolve claims.

On October 19th, the National Credit Union Administration (NCUA) announced that Barclays Capital agreed to pay $325 million to resolve claims arising from losses related to purchases of faulty residential mortgage-backed securities by corporate credit unions. For more information, visit the NCUA’s website here.

NCUA recovers $2.2 billion from litigation against institutions.

The NCUA announced that total recoveries from litigation against banks that sold faulty residential mortgage-backed securities to corporate credit unions will reach $2.2 billion with the completion of an agreement with Wachovia. The final institution, Wachovia, agreed to pay $53 million to resolve claims concerning losses. More information can be found here.

NCUA prohibition orders issued.

The NCUA issued three more orders in October prohibiting several individuals from participating in the affairs of any federally-insured financial institution. These are available online, along with other recent actions, on the NCUA’s website.

FED

Federal Reserve Bank

Interagency exam procedures for Regulation P revised.

On October 5th, the Federal Reserve Board revised examination procedures for Regulation P “Privacy of Consumer Financial Information.” The revisions reflect rulemaking issued by the CFPB in October 2014 amending requirements regarding provisions of annual disclosure of privacy practices. For more information, visit the FRB’s website here

Emergency Communications System expanded.

The Federal Reserve issued a letter announcing the expansion of its Emergency Communications System (ECS). The expansion includes the addition of contact information of employees at Federal Reserve-supervised financial institutions who are capable of receiving and acting upon cyber emergencies. For more information on this expansion, visit the Federal Reserve’s website here.

Former executive to pay $100,000 to settle administrative charges.

On October 19th, the Federal Reserve Board announced that a former executive vice president was barred from participating in the affairs of any insured depository institution. He was also ordered to pay a civil penalty of $100,000 to settle administrative charges. For more information on the case, visit the Federal Reserve’s website

French institution to pay $90.3 million penalty.

On October 20th, the Federal Reserve Board announced a $90.3 million penalty and consent cease and desist order against Crédit Agricole related to violations of U.S. sanctions. The institution was also prohibited from re-employing the individuals involved in the past actions or retaining them as consultants or contractors. Find more information here. 

FED

Department of Justice

Pharmacy to pay $9.25 million to settle allegations.

On October 7th, the Department of Justice (DOJ) announced that PharMerica Corp. agreed to pay $9.25 million to resolve kickback allegations. The company was charged with soliciting and receiving kickbacks from manufacturers in exchange for promoting a prescription drug for nursing home patients. $2.5 million will be allocated to cover Medicaid program claims by states electing to participate in the settlement. Find more information on the case here.

Hospital to pay $4.1 million to resolve False Claims Act allegations.

A Cincinnati-based hospital has agreed to pay penalties to settle allegations that it violated the False Claims Act by billing federal health care programs for costs associated with medically unnecessary spine surgeries. 

Woman sentenced for $2.5 million stolen identity refund fraud ring.

A woman was sentenced to five years in prison and ordered to pay over $725,000 in restitution to the Internal Revenue Service (IRS) for conspiracy to defraud the United States with respect to claims as well as for aggravated identity theft. For more information on the case, visit the DOJ’s website here.

$237 million judgment resolved.

On October 16th, the DOJ announced that it resolved a $237 million judgment against a company for illegally billing the Medicare program for services referred by physicians with whom the hospital had improper financial relationships. 

Others

Other Regulatory Bodies

Scammers pay $7.9 million judgment.

Debt relief scammers agreed to pay a judgment of more than $7.9 million to settle Federal Trade Commission charges. Allegedly the scammers deceived consumers and charged them thousands of dollars while providing nothing in return. For more information about the complaint and charges, see the FTC’s website here.

OFAC issues most recent actions.

The Office of Foreign Assets Control (OFAC) consistently updates its list of recent actions. In October, several Counter Terrorism Designations (CTDs) were issued in addition to Kingpin Act Designations, liquidations, and counterterrorism designations. See the full list of actions here.

Sprint to pay $9.25 million penalty for FCRA violations.

On October 21st, the Federal Trade Commission (FTC) announced charges against the mobile service provider, Sprint, for failure to give proper notice to consumers who were placed in a program for customers with lower credit scores. For more information, please visit the FTC’s website here.