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  • Maryland-based company enters deferred prosecution agreement for violations of FCPA antibribery provisions

    Financial Crimes

    On March 13, a Maryland federal court unsealed bribery-related charges filed in January 2018 against a Maryland-based company (part of a French industrial supplier), as well as a three-year deferred prosecution agreement filed on March 12. The government alleges that the company conspired to violate the FCPA by arranging and paying bribes to Russian officials to obtain uranium transportation contracts between 2004 and 2014. Pursuant to the deferred prosecution agreement, the company agreed to pay a $2 million criminal fine, adopt a compliance program, and provide periodic reporting to DOJ. According to the agreement, the company received credit for its substantial cooperation with the investigation and for its remedial actions, including firing all employees involved in the criminal conduct.

    As previously covered here, in 2015 three individuals entered into guilty pleas in this matter: a former Russian official based in Maryland; a former co-president of the company; and an alleged intermediary between the company and the Russian official. Most recently and as covered here, the other former co-president of the company, was charged in an 11-count indictment, unsealed in January 2018, alleging numerous violations of the FCPA and conspiracy to violate the FCPA.

    Financial Crimes DOJ FCPA Bribery

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  • Israeli real estate conglomerate to pay $500,000 to resolve SEC allegations of FCPA violations

    Financial Crimes

    On March 9, an Israeli-based real estate conglomerate (the company) agreed with the SEC, pursuant to an administrative order, to pay $500,000 to resolve alleged violations of FCPA books and records and internal controls provisions. According to the order, the SEC found that from 2007 through 2012, the company and its Netherlands-based subsidiary paid millions of dollars to third party consultants and agents for purported services related to a Romanian real estate project and the sale of a real estate asset portfolio in the United States. The SEC found that these payments were made with no indication that any services were actually provided.

    The company did not admit or deny the SEC’s findings, but agreed to resolve this matter with a civil money penalty. In accepting the company’s offer for resolution, the SEC took into consideration the company’s self-reporting in 2016 to authorities in Romania and in the U.S., as well as its full cooperation with the investigation, including the hiring of outside counsel to conduct an internal investigation, the findings of which were shared with the SEC. The SEC also considered the extensive remedial measures the company has put into place as a result of those findings and the Commission’s suggestions.

    Financial Crimes SEC FCPA

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  • CFPB releases RFI on adopted regulations and new rulemaking authorities

    Federal Issues

    On March 14, the CFPB released its eighth Request for Information (RFI) in a series seeking feedback on the Bureau’s operations. This RFI solicits public comment to assist the Bureau in deciding “whether it should amend any rules it has issued since its creation or issue rules under new rulemaking authority provided for by the Dodd-Frank Act,” which the RFI defines as the Bureau’s “Adopted Regulations.” This RFI does not seek information related to the Bureau’s “Inherited Regulations” that have not yet been amended by the CFPB. Inherited Regulations are those promulgated under the consumer financial laws that were previously vested in other federal agencies but the Bureau assumed responsibility over through the Dodd-Frank Act.

    The CFPB is requesting feedback regarding the content of all Adopted Regulations, except for its 2015 HMDA final rule (or its subsequent amendments) and its final rule addressing payday loans, vehicle title loans, and certain other extensions of credit. Specifically, the RFI seeks information related to all aspects of the Adopted Regulations, including (i) whether the Adopted Regulations should be tailored to an institution of a particular size or are incompatible with new technologies; (ii) changes the Bureau could make to the Adopted Regulations to more effectively meet the specific law’s statutory purpose; (iii) changes the Bureau could make to the Adopted Regulations to advance the statutory purposes stated in Section 1021 of the Dodd-Frank Act; (iv) whether the Bureau should introduce pilots, field tests, demonstrations or other activities to better analyze the cost/benefits of potential Adopted Regulations; and (v) where the Bureau could exercise more of its rulemaking authority to better align with the objectives of the applicable consumer financial laws. The Bureau also requested comment on aspects of the adopted regulations that should not be amended. The RFI is expected to be published in the Federal Register on March 19. Comments will be due 90 days from publication.

    Federal Issues RFI CFPB Succession Agency Rule-Making & Guidance

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  • Fannie Mae updates Servicing Guide with HomeStyle Renovation policy changes

    Federal Issues

    On March 14, Fannie Mae updated its Servicing Guide to include industry best practices for servicing HomeStyle Renovation Mortgage Loans (Renovation Loans). According to Fannie Mae SVC-2018-02, the updates to the Servicing Guide include, among other changes, new requirements to: (i) conduct property inspections for all Renovation Loans before escrow draw requests may be approved; (ii) ensure that all subcontractors are licensed in jurisdictions where licensing applies; (iii) perform updated appraisals when repairs deviate materially from the original plan; and (iv) provide a certificate of occupancy upon completion. Additional changes to the requirements for Renovation Loans may also be found in Fannie Mae’s recently updated Selling Guide, covered by InfoBytes here.

    The updates to the Servicing Guide also include an update to the Allowable Foreclosure Attorney Fees Exhibit, which changes the maximum allowable fees for loans secured by properties in certain states. The Servicing Guide requirements for determining the modified terms under the Fannie Mae Cap and Extend Modification for Disaster Relief have also been updated.

    Federal Issues Fannie Mae Servicing Guide Mortgages Disaster Relief

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  • Senate passes bipartisan financial regulatory reform bill

    Federal Issues

    On March 14, by a vote of 67-31, the Senate passed the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) (the bill)—a bipartisan regulatory reform bill crafted by Senate Banking, Housing, and Urban Affairs Committee Chairman Mike Crapo, R-Idaho—that would repeal or modify provisions of Dodd-Frank and ease regulations on all but the biggest banks. (See previous InfoBytes coverage here.) The bill’s highlights include:

    • Improving consumer access to mortgage credit. The bill’s provisions state, among other things, that: (i) banks with less than $10 billion in assets are exempt from ability-to-repay requirements for certain qualified residential mortgage loans; (ii) appraisals will not be required for certain transactions valued at less than $400,000 in rural areas; (iii) banks and credit unions that originate fewer than 500 open-end and 500 closed-end mortgages are exempt from HMDA’s expanded data disclosures (the provision would not apply to nonbanks and would not exempt institutions from HMDA reporting altogether); (iv) amendments to the S.A.F.E. Mortgage Licensing Act will provide registered mortgage loan originators in good standing with 120 days of transitional authority to originate loans when moving from a federal depository institution to a non-depository institution or across state lines; and (v) the CFPB must clarify how TRID applies to mortgage assumption transactions and construction-to-permanent home loans, as well as outline certain liabilities related to model disclosure use.
    • Regulatory relief for certain institutions. Among other things, the bill simplifies capital calculations and exempts community banks from Section 13 of the Bank Holding Company Act if they have less than $10 billion in total consolidated assets. The bill also states that banks with less than $10 billion in assets, and total trading assets and liabilities not exceeding more than five percent of their total assets, are exempt from Volcker Rule restrictions on trading with their own capital.
    • Protections for consumers. Included in the bill are protections for veterans and active-duty military personnel such as: (i) permanently extending the protection that shields military personnel from foreclosure proceedings after they leave active military service from nine months to one year; and (ii) adding a requirement that credit reporting agencies provide free credit monitoring services and credit freezes to active-duty military personnel. The bill also addresses general consumer protection options such as expanded credit freezes and the creation of an identity theft protection database. Additionally, the bill instructs the CFPB to draft federal rules for the underwriting of Property Assessed Clean Energy loans (PACE loans), which would be subject to TILA consumer protections.
    • Changes for bank holding companies. Among other things, the bill raises the threshold for automatic designation as a systemically important financial institution from $50 billion in assets to $250 billion. The bill also subjects banks with $100 billion to $250 billion in total consolidated assets to periodic stress tests and exempts from stress test requirements entirely banks with under $100 billion in assets. Additionally, certain banks would be allowed to exclude assets they hold in custody for others—provided the assets are held at a central bank—when computing the amount such banks must hold in reserves.
    • Protections for student borrowers. The bill’s provisions include measures to prevent creditors from declaring an automatic default or accelerating the debt against a borrower on the sole basis of bankruptcy or cosigner death, and would require the removal of private student loans on credit reports after a default if the borrower completes a loan rehabilitation program and brings payments current.

    The bill now advances to the House where both Democrats and Republicans think it is unlikely to pass in its current form.

    Federal Issues Federal Legislation Bank Regulatory Dodd-Frank S. 2155 CFPB HMDA Mortgages Licensing TILA TRID Servicemembers Volcker Rule Student Lending Consumer Finance Bank Holding Companies Community Banks Privacy/Cyber Risk & Data Security

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  • California appellate court says mortgage servicers can be debt collectors under Rosenthal Act

    State Issues

    On March 13, a California appellate court held that a mortgage servicer that engages in debt collection activities may be considered a “debt collector” under California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act). The decision results from a class action lawsuit alleging that the mortgage servicer made hundreds of phone calls demanding mortgage payments that had already been paid or were not yet due, including making calls at inconvenient times throughout the day and using threats of negative credit reporting and foreclosure. The class action suit alleged that the mortgage servicer’s activity violated the Rosenthal Act and the California’s Unfair Competition Law. The trial court sustained the mortgage servicer’s demurrer to the plaintiff’s complaint, concluding that servicing a mortgage is not a form of collecting consumer debts. In reversing the trial court’s decision, the appellate court held that, although the language in the Rosenthal Act was ambiguous with regard to mortgage debt servicing, it should be “construed broadly in favor of protecting the public,” and thus mortgage lenders and mortgage servicers can be considered “debt collectors” within the law’s purview. The appellate court acknowledged a split among California federal courts on the issue.

    State Issues Courts Debt Collection Mortgage Servicing

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  • NYDFS issues cybersecurity compliance certificate reminder

    Privacy, Cyber Risk & Data Security

    On March 5, the New York Department of Financial Services (NYDFS) published FAQs for regulated entities that have not yet filed cybersecurity certifications of compliance (Certification of Compliance) required under 23 NYCRR 500. The deadline to file was February 15 and notices recently were sent to regulated entities. Among other things, the FAQs state that a separate Certification of Compliance must be filed for each license an entity holds, and that entities who have failed to submit a Certification of Compliance must do so “as soon as possible.” Entities that received a reminder to certify their compliance but filed for an exemption under Section 500.19 are still required to file the Certificate of Compliance to “confirm that they are in compliance with those provisions of the regulation that apply.”

    Find continuing InfoBytes coverage on NYDFS’s cybersecurity regulation here.

    Privacy/Cyber Risk & Data Security State Issues NYDFS Compliance

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  • Federal Reserve orders Chinese bank to correct BSA/AML controls

    Financial Crimes

    On March 12, the Federal Reserve Board (Fed) entered into a consent order with a Chinese bank (bank) and its New York branch (branch) in connection with alleged Bank Secrecy Act and anti-money laundering (BSA/AML) violations. According to the Fed’s order, a recent examination identified “significant deficiencies” in the branch’s BSA/AML compliance and risk management controls. The consent order requires, among other things, the bank and branch submit within 60 days: (i) a written governance plan to achieve compliance with BSA/AML requirements; (ii) a system to identify and assess risks associated with all products and customers, including “politically exposed persons”; (iii) an enhanced customer due diligence program plan; and (iv) a compliance program to ensure accurate suspicious activity monitoring and reporting. The bank and branch are further required to engage an independent third party acceptable to the Fed to review their dollar-clearing transaction activity in the second half of 2016 “to determine whether suspicious activity involving high-risk customers or transactions” was properly flagged. The order imposes no financial penalty.

    Financial Crimes Federal Reserve Bank Secrecy Act Anti-Money Laundering Bank Compliance International

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  • Virginia governor enacts amendment relating to security freeze fees

    State Issues

    On March 9, the governor of Virginia signed House Bill 1027, which amends sections of the Code of Virginia relating to security freezes and lowers the maximum amount that a credit reporting agency may charge to place, remove, or lift a security freeze on a protected consumer’s credit report from $10 to $5. Victims of identity theft remain exempt from the fee. The amendment takes effect July 1.

    State Issues State Legislation Data Breach Privacy/Cyber Risk & Data Security

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  • Payday lender settles with California DBO for interest rate cap avoidance

    State Issues

    On March 12, the California Department of Business Oversight (DBO) announced a $160,000 settlement with the California subsidiary of a payday lender for allegedly adding improper fees to installment loan principle amounts in order to avoid the California Finance Law’s (CFL) interest rate cap. The settlement resulted from a DBO examination in which the DBO issued a finding that: (i) the lender failed to exclude fees payable to the California DMV when calculating the principal amount of certain vehicle title loans; (ii) excluding the DMV fees, the bona fide principal amount of the loans at issue was less than $2,500; and (iii) the loans were, therefore, subject to the CFL interest rate cap on loans with a principal amount of less than $2,500, which was exceeded on 591 loans. Without admitting to any wrongdoing, the lender agreed to pay an administrative penalty of approximately $78,000 to the DBO and to refund approximately $82,000 to allegedly affected borrowers.

    State Issues Settlement Payday Lending Vehicle Title Interest Rate DBO

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