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October 2018 - Compliance Alert

Consumer Financial Protection Bureau (CFPB)

CFPB and Bluestem Reach Settlement

The CFPB and Bluestem have filed a consent order that requires Bluestem, a Minnesota-based business, to improve their operations regarding the identification and forwarding of customer payments on accounts sold to debt buyers.

The CFPB found that Bluestem had violated the Consumer Financial Protection Act of 2010. Bluestem was found to have been delaying payments being made on accounts that had been sold to debt buyers. This likely led to misleading collection activity for customers, including making payments on paid off accounts.


Financial Crimes Enforcement Network (FinCEN)

FinCEN Issues Advisory on Iranian Attempts to Exploit Financial System

In order to help financial institutions better identify and report possible illicit transactions involving the Islamic Republic of Iran, FinCEN has issued an advisory. The advisory includes information regarding the possible threats coming from the Iranian regime for US institutions as well as foreign institutions with correspondent banking relationships with US institutions. This includes potential red flags and descriptions of strategies used by the regime to evade sanctions. 


The Office of the Comptroller of the Currency (OCC)

OCC and Other Agencies Issue Statement on Financial Institutions Affected by Hurricane Michael

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and state regulators have issued a statement asking financial institutions in areas that have been affected by Hurricane Michael to meet the needs of their communities.

The statement touched on how the institutions should handle lending, operating out of temporary facilities, publishing requirements, regulatory reporting requirements, monitoring investments, and receiving Community Reinvestment Act (CRA) loans.

The full statement can be found here.


Securities and Exchange Commission

SEC Launches FinHub

The SEC announced the launch of the Strategic Hub for Innovation and Financial Technology (FinHub). As financial technology develops and changes, FinHub will provide a place for the public to engage on important issues in this area. It also builds upon and replaces SEC groups that have focused on these issues in the past.



The Federal Deposit Insurance Corporation (FDIC)

FDIC Releases Spanish-Language Tool for Elders

The FDIC announced that they would release a Spanish-language version of Money Smart for Older Adults. The course is made to help older adults and those that take care of older adults identify the dangers of financial abuse targeted at elders. The course has been updated with new information to help older people stay informed, make smarter financial decisions, recognize the signs of fraud, and prevent fraud from occurring.

The National Credit Union Administration (NCUA)

NCUA Approves Amended Risk-Based Capital Rule and Rule for Federal Credit Union Bylaws

During its ninth open meeting of the year, the NCUA approved two items unanimously. The first item was a final rule regarding 2015’s risk-based capital rule, delaying the effective date until January 1, 2019. This final rule also raised the threshold for a complex credit union from $100 million to $500 million.

The second item was a proposed rule that would simplify credit union bylaws, making them clearer. Credit unions will be able to comment on this proposed rule.


September 2018 - Compliance Alert

Consumer Financial Protection Bureau (CFPB)

BCFP Files Lawsuit

The BCFP recently filed a lawsuit against Future Income Payments, LLC (FIP), Scott Kohn, and several other related entities. The law suit was filed in California and alleges that these entities violated the Consumer Financial Protection Act of 2010 12 U.S.C. § 5536(a)(1)(B). This violation occurred when these entities led consumers to believe that their pension-advance products were not loans with interest and were cheaper than credit card debt. In reality, these products had interest rates that were higher than regular credit card rates.


Financial Crimes Enforcement Network (FinCEN)

FinCEN Grants Exceptive Relief Regarding the Beneficial Ownership Rule

FinCEN recently granted exceptive relief to covered financial institutions regarding the Beneficial Ownership Requirements for Legal Entity Customers (Beneficial Ownership Rule). This relief deals with the Rule’s requirements to identify and verify the identity of a beneficial owner when a legal entity customer opens a new account as a result of a rollover of a certificate of deposit, a renewal, modification, or extension of a loan that does not require underwriting review and approval, a renewal, modification, or extension of a commercial line of credit or credit card account that does not require underwriting review and approval, and a renewal of a safe deposit box rental. The exception only applies to the rollover, renewal, modification, or extension occurring on or after May 11, 2018.

The Office of the Comptroller of the Currency (OCC)

Agencies Extend Comment Period for Volcker Rule Change

Several agencies recently extended the comment period for changes to the Volcker Rule, which restricts banking entities from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds. These changes are meant to simplify compliance requirements of the Rule. The comment period has been extended to October 17, 2018.


Amendments Made to Swap Margin Rule 

Several federal agencies accepted amendments to the swap margin requirements. These amendments were made to meet the requirements of new restrictions on certain qualified financial contracts of systemically important banking organizations (QFC Rules).

The amendments state that legacy swaps entered into before the compliance date will not become subject to the margin requirements if they are amended solely to comply with the requirements of the QFC Rules. The amendments also change the definition of “Eligible Master Netting Agreement” in the swap margin rule to more closely match recent changes to the definition of “Qualifying Master Netting Agreement”.


Securities and Exchange Commission

SEC Offers Regulatory Relief to Hurricane Victims

The SEC recently announced that it will be providing relief to certain companies and individuals affected by Hurricane Florence that are required to provide information to the SEC and shareholders. Because of property loss, power loss, transportation difficulties, and mail delivery issues, the SEC issued an order that exempts affected entities and individuals from certain requirements of the federal securities law under certain conditions. They also extended deadlines for the filing of specific reports and forms. 

August 2018 - Compliance Alert

The Federal Reserve

Federal Reserve Board barred CEO of NBRS Financial from Working in the Banking Industry

The Federal Reserve Board recently barred the former president and CEO of NBRS Financial from working in the banking industry.

The Board found that the former president and CEO had been involved in self-dealing transactions with bank loans and was keeping information from the NBRS board of directors. The Board considers these practices as unsafe and unsound, violating the law, as well as a failure in his duties to NBRS Financial.

The Board issued this prohibition order by default and the former CEO did not respond to the notice of enforcement.


Federal Reserve Board Will Begin TDF Testing in August

The Federal Reserve has been periodically testing the Term Deposit Facility (TDF). The purpose of this testing is to ensure the TDF is ready and giving qualified institutions opportunities to familiarize themselves with deposit practices.

The Federal Reserve began one of these operations on August 23rd, which included multiple actions, all of which can be found here.


The Office of the Comptroller of the Currency (OCC)

The OCC Issues Enforcement Actions

The Office of the Comptroller of the Currency issued several enforcement actions. These actions included the following: Cease and Desist Orders, Civil Money Penalty Orders, and Removal/Prohibition Orders.

For a full list of the institutions and banks, as well as the full copies of the final actions, view the full press release from the OCC.



Other Regulatory Bodies

FINRA Issues First Annual Industry Snapshot

To increase awareness about the industries and practices that FINRA regulates, they release an Annual Industry Snapshot. This Snapshot includes important data regarding the brokerage firms, registered individuals and market activity that FINRA regulates. See the full Snapshot here.



July 2018 - Compliance Alert

The Federal Reserve

Federal Reserve Board removes regulatory hurdles for some smaller banking organizations

The Federal Reserve Board will no longer hold smaller, less complex financial institutions to Dodd-Frank enhanced prudential standards in compliance with the newly enacted Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).

The threshold for prudential standards was raised from $50 billion to $100 billion in total consolidated assets for bank holding companies under the EGRRCPA. As a result, certain regulations conflict with the new law and required the board to act.

This led to the board’s decision to enforce certain regulations and reporting requirements for firms with less than $100 billion in total consolidated assets, such as rules implementing enhanced prudential standards and the liquidity coverage ratio requirements.


The Office of the Comptroller of the Currency (OCC)

The OCC issued a statement on the 'Impact of the Economic Growth, Regulatory Relief, and Consumer Protection Act'

Federal banking agencies issued a statement regarding changes in company-run stress testing, resolution plans, the Volcker rule, high volatility commercial real estate exposures, examination cycles, municipal obligations as high-quality liquid assets, and other provisions.

These changes are a result of the enactment of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). A pdf was released by the Federal Reserve Board, which details these changes. 

These banking agencies will continue to monitor and regulate the financial institutions that they are charged with to ensure the health and the stability of the banking system. More banking laws may be amended in the future because of EGRRCPA.


Other Regulatory Bodies

U.S. Commodity Futures Trading Commission

The CTFC issues report on Chicago Mercantile Exchange's agricultural block trades

The Commodity Futures Trading Commission (CFTC) issued a report analyzing the first three months of block trading in grains, oilseeds, and livestock markets on the Chicago Mercantile Exchange (CME).

Trading for agricultural futures and option products began on January 2018 and the CFTC studied how block trades are affecting liquidity from the central limit order book and price transparency.

Block trades are privately negotiated futures and options transactions.

The study found that these block trades occur in nearby months with future expirations happening within the next 90 days.

While occurring on specific dates and for certain contract months, these block trades occupy a very small portion of the agricultural markets. Moreover, market makers are offsetting much of the block volume.

The biggest take away from the study is all the reviewed block trades fell within the CME’s rule for “fair and reasonable” prices.





June 2018 - Compliance Alert

Financial Crimes Enforcement Network (FinCEN)

FinCEN Issues Advisory on Human Rights Abuses Enabled by Corrupt Senior Foreign Political Figures and Their Financial Facilitators

The Financial Crimes Enforcement Network (FinCEN) issued an advisory to U.S. financial institutions, warning of the connection between corrupt senior foreign political figures and their enabling of human rights abuses.

The use of financial facilitators is one way that corrupt senior foreign political figures

By gaining access to the U.S. and international financial systems through the use of financial institutions, corrupt senior foreign political figures are able to move or hide illicit proceeds while evading U.S. and global sanctions.

They directly or indirectly participate in human rights abuses, devastating citizens, societies, and economic development.

U.S. financial institutions that hold the accounts of these corrupt figures expose themselves to great risks, whether it is directly or indirectly via banking relationships.

Financial institutions, under the Bank Secrecy Act, are obligated to report suspected illicit activity by these facilitators.


The Federal Reserve

Federal Reserve Board releases results of supervisory bank stress tests

The Federal Reserve found that the largest bank holding companies in the U.S. are poised to lend to the nation’s households and businesses in case of a severe global recession.

In their supervisory stress test, one of eight since 2009, they found that under the most severe scenario losses would total in $578 billion for 35 of the participating banks with U.S. unemployment rising to 10 percent.

The Federal Reserve cited a few factors that affected the post-stress capital ratios:

  • Credit card balances are higher
  • Recent tax code changes
  • The elimination of some beneficial tax treatments

Roughly 80 percent of all banking assets operating in the U.S. are owned by the 35 firms who were tested.


The Office of the Comptroller of the Currency (OCC)

OCC Reports First Quarter 2018 Bank Trading Revenue

The Office of the Comptroller of the Currency (OCC) reported trading revenue of U.S. commercial banks and federal savings associations of $8.2 billion in the first quarter of 2018.

The report shows that the first quarter of 2018 was 62.8 percent higher than the fourth quarter in 2017, that’s an increase of $3.2 billion, and compared to the first quarter in 2017, it was an increase of 15 percent.

While four large banks held 89.8 percent of the total banking industry notional amount of derivatives, a total of 1,357 insured U.S. commercial banks and savings associations held derivatives at the end of the first quarter 2018.

Derivative contracts remained concentrated in interest rate products, which represented 76.3 percent of total derivative notional amounts.

The percentage of centrally cleared derivatives transactions increased slightly to 39.8 percent in the first quarter 2018.


The Department of Justice

FTC and DOJ Approve Procedural Changes to HSR Form Instructions

The Federal Trade Commission, with the concurrence of the Antitrust Division of the U.S. Department of Justice, has approved amendments to the Hart-Scott-Rodino Premerger Notification Rules.

The instructions for filling out the form used by companies to report a proposed merger, acquisition, or similar transaction under the Hart-Scott-Rodino Antitrust Improvements Act have also been changed.

To review the potential of any anticompetitive impact of these proposed transaction the FTC and the Antitrust Division of the DOJ created the Premerger Notification and Report Form, also referred to as the HSR Form.

The amendments have been introduced to clarify some language used in the Rules and the instructions and enable the use of email for specific instances, such as in granting early termination.

Enacted by Congress in 1976, the Hart-Scott-Rodino Antitrust Improvements Act gives the federal government the opportunity to investigate and challenge mergers that are likely to harm consumers before injury occurs.


Other Regulatory Bodies

U.S. Commodity Futures Trading Commission

CTFC Orders JPMorgan Chase Bank, N.A. to Pay $65 Million Penalty for Attempted Manipulation of U.S. Dollar ISDAFIX Benchmark Swap Rates

The Commodity Futures Trading Commission (CFTC) settled charges against JPMorgan Chase Bank, N.A. (JPMC) for attempted manipulation of the ISDAFIX benchmark and required JPMC to pay a $65 million civil monetary penalty.

Over a five-year period, beginning in January 2007 through January 2012, JPMC made false reports and attempted to manipulate the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX).

It is a leading global benchmark referenced in a range of interest rate products, to benefit its derivatives positions, including positions involving cash-settled options on interest rate swaps.

The CFTC found that certain JPMC traders understood and employed two primary means in their attempts to manipulate USD ISDAFIX rates:

  1. trading attempted manipulation
  2. submission attempted manipulation







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