The Financial Crimes Enforcement Network (FinCEN)

The Financial Crimes Enforcement Network Issues Cyber-Crime Alert

The Financial Crimes Enforcement Network (FinCEN) disseminated an advisory to financial institutions on the significant threat cyber-enabled crimes and events pose to the U.S. financial system and its customers. Similarly, FinCEN emphasized the important role all financial institutions play in the fight against cyber criminals and cyber-related events and crime.

Federal Deposit Insurance Corporation (FDIC)

The Federal Deposit Insurance Corporation Issues Final Recordkeeping Rule to Deposit Institutions

The Federal Deposit Insurance Corporation (FDIC) released a final recordkeeping rule for deposit institutions in the event of a large bank failure. Deposit institutions with at least 2 million depositors, approximately 38 institutions, are now required to maintain thorough and accurate records on individual depositors and provide this data within 24 hours of a bank failure. Deposit institutions have three years to comply.

 

Office of the Comptroller of the Currency (OCC)

Sixty Day Comment Period in Progress for Proposed OCC Flood Insurance Rule

The Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve (Federal Reserve Board), the Farm Credit Administration (FCA), the National Credit Union Administration (NCUA), and the Federal Deposit Insurance Corporation (FDIC) have jointly proposed a rule implementing the Biggers-Waters Flood Insurance Reform Act (BWFIRA) of 2012. A comment period is in progress. The BWFIRA requires regulated lending institutions to accept private flood insurance policies whether or not they meet the act’s stipulations However, in the latter instance, some restrictions apply.

Securities and Exchange Commission (SEC)

The Security Exchange Commission Issues Third Highest Whistleblower Award

The Security Exchange Commission (SEC) recently distributed a 20 million dollar whistleblower award for information leading to the virtual complete recovery of investor funds. Whistleblower awards are distributed from a Congressional fund that is financed by securities violators. Moreover, the identity of award recipients remains confidential. This important privacy protection serves as an incentive for individuals with material information leading to enforcement action to come forward. This latest whistleblower payment is the third highest since the program was instituted in 2012; the current award total is now 130 million dollars. Whistleblower awards represent 10 to 30 percent of the total recovered amount.

Consumer Financial Protection Bureau (CFPB)

The Consumer Financial Protection Bureau Isses Servicemember Complaint Report

A new CFPB report “A snapshot of servicemember complaints,” highlights servicemember dissatisfaction with Veterans Administration mortgage refinancing. As of November 1, 2016, 12, 500 complaints were logged by servicemembers, veterans and their dependents. Among the myriad complaints are poor communication, aggressive sales tactics, misleading advertisements and processing delays that result in unfavorable rates and terms.

 

Department of Justice

Four Californians Plead Guilty to Using Debit Relief Firms to Defraud Consumers

Four debt relief firm employees offered credit card debt settlement programs to consumers and collected the first six months of customer payments as up-front fees. Additionally, to avoid detection, these employees continued this scheme, over a two-year period, by changing company names. Each employee admitted guilt and will face mandatory restitution and imprisonment. The U. S. Department of Justice and the U. S. Postal Inspection Service collaborated on the investigation and applauded the successful outcome.

 

Other Regulatory Bodies

U. S. Commodity Futures Trading Commission

The U.K Financial Authority and The Commodity Futures Trading Commission Fine Six Banks

The U.K. Financial Conduct Authority (FCA), the Commodity Futures Trading Commission (CFTC), and other bank regulators fined six major, well-known banks for lacking sufficient trader oversight, which led to a manipulation of the foreign exchange markets. A total of 4.3 billion dollars was assessed.

 

The Federal Trade Commission

Spanish-Speaking Consumers to Receive FTC Settlement Checks

Centro Natural Corp and Sumore, LLC orchestrated a profitable, fraudulent telemarketing scheme aimed at Spanish-speaking consumers. International collections operators were hired to collect payments for bogus debts. Impersonating government officials, collectors threatened Spanish-speaking consumers with arrest or deportation if payment was not made. Similarly, aggressive sales tactics for unwanted sales products also occurred. Under a Federal Trade Commission (FTC) settlement, Centro Natural Corp and Sumore, LLC international operators were banned from future debt collection and telemarketing businesses. Additionally, about 3,400 defrauded consumers received FTC settlement checks averaging $241.00.

 

Financial Industry Regulatory Authority(FINRA)

FINRA Imposes Sanctions on Eight Firms for Annuities Supervisory Failures

Eight firms must pay customers 6 million dollars for failing to exercise due diligence in the training, guidance and supervision of L-shaped annuity sales. L-shaped annuities are sold at a premium in exchange for an early surrender period. As such, they appeal to a limited number of investors. Identifying suitable investors and understanding the value proposition for L-shaped annuities requires guidance and training. FINRA determined registered representatives lacked the training needed to effectively sell L-shaped annuities to qualified investors. Additionally, commission sales were higher for these investment products. Purchasers of L-shaped annuities unknowingly incurred additional costs because complex riders were included with the sale. These riders guaranteed income and surrender privileges but over a longer time period. The net effect was the elimination of the product’s appeal.

 

Federal Financial Institutions Examination Council (FFIEC)

The Federal Financial Institutions Examination Council Updates Its Uniform Interagency Consumer Compliance Rating System

The Federal Financial Institutions Examination Council (FFIEC) amended its Consumer Compliance Rating System (CCRS) to ensure alignment with a more risk-based, customized examination approach used by FFIEC agencies. Similarly, the revised CCRS integrates changes noted in the market, regulatory landscape, technology, and supervisory examinations. The revised system applies to financial institutions and non-banks with assets totaling more than 10 billion dollars and is used by the CFPB, in accordance with Dodd-Frank. The CCRS is a holistic rating and uses a 1 to 5 rating scale, from highest to lowest. These changes come more than 35 years after the CCRS was introduced. Implementation will occur on or after March 31, 2017. The rating encompasses three areas: board and management oversight, the compliance program, and violations of law and consumer harm. Additionally, material financial institution examination findings are shared among the CFPB and other prudential regulators, who also conduct separate reviews. As such, an institution would receive two ratings.