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  • OCC announces enforcement action against Washington-based bank citing BSA/AML compliance deficiencies

    Financial Crimes

    On February 28, the OCC issued a consent order against a Washington-based bank for deficiencies related to its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) compliance program. The consent order requires the bank to, among other things, (i) maintain a Compliance Committee responsible for ensuring the bank adheres to the consent order’s provisions; (ii) appoint a BSA officer who will ensure compliance with the requirements of the BSA and the Office of Foreign Assets Control’s rules and regulations; (iii) implement an enhanced BSA/AML Risk Assessment Program, including the adoption of written policies to ensure the timely review of BSA/AML suspicious activity alerts and the implementation of an automated suspicious activity monitoring system; (iv) conduct a risk-based “Look-Back” to determine whether suspicious activity was timely identified and reported by the bank; (v) develop policies and procedures for enhanced customer due diligence to monitor information for risk; (vi) implement an independent BSA/AML audit program; and (vii) create a comprehensive training program for appropriate bank personnel. The bank did not admit to any wrongdoing in the consent order.

    Financial Crimes OCC Bank Secrecy Act Anti-Money Laundering Enforcement OFAC SARs

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  • Buckley Sandler Special Alert: Mulvaney says the CFPB will depend heavily on state Attorneys General for enforcement of consumer protection laws

    Federal Issues

    Buckley Sandler Special Alert

    Mick Mulvaney, the acting director of the Consumer Financial Protection Bureau, in a February 28 speech, outlined the Bureau’s overall direction and strategic priorities, and described plans to coordinate with state Attorneys General in enforcing federal consumer financial protection law. Mulvaney made the remarks in Washington, D.C., at the winter meeting of the National Association of Attorneys General (NAAG).

    * * *

    Click here to read the full special alert.


    If you have questions about the remarks or other related issues, please visit our State Attorneys General and Consumer Financial Protection Bureau practice pages, or contact a Buckley Sandler attorney with whom you have worked in the past.

    Federal Issues CFPB Succession State Attorney General Enforcement Special Alerts

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  • Texas State Securities Board issues order halting unregistered cryptocurrency trading operation


    On February 26, the Texas State Securities Board (Board) issued an emergency cease and desist order (order) to an unregistered cryptocurrency trading operation for allegedly targeting investors through fraudulent and materially misleading online advertisements and offering unregistered securities for sale. According to the order, the company purportedly—in addition to intentionally seeking to mislead the public by promoting high-return investment opportunities—failed to disclose risks associated with cryptocurrency mining, promised investors it would comply with “all relevant laws and regulations,” and claimed that its fund directors were regulated by the Cayman Islands. The Board further asserted the company failed to disclose the true identities of its Code of Ethics Association members responsible for “contract law, due diligence and corporate law,” and instead, created the impression it was associated with attorneys and judges, including U.S. Supreme Court Justice Ruth Bader Ginsburg. Under the terms of the order, the company, among other things, is prohibited from engaging in the sale of securities in the state until the security is registered with the SEC or exempt from registration under the Texas Securities Act, and cannot act as a securities dealer until it complies with the same.

    Securities State Issues Cryptocurrency Enforcement SEC Fintech

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  • FDIC fines banks for flood insurance violations, releases January enforcement actions

    Federal Issues

    On February 23, the FDIC released a list of 12 administrative enforcement action orders taken against banks and individuals in January. Civil money penalties were assessed against two banks, including one against a Michigan-based bank citing violations of the Flood Disaster Protection Act (FDPA) and the National Flood Insurance Act (NFIA) for allegedly: (i) failing to obtain flood insurance on a borrower’s behalf at origination in multiple instances, and twice failing to maintain adequate flood insurance; (ii) failing twice to follow force placed flood insurance procedures; and (iii) failing to notify borrowers in multiple instances that the “collateral for the loan was in a designated special flood hazard area.” The other civil money penalty was assessed against a Wisconsin-based bank for allegedly engaging in a pattern of violating requirements under the FDPA and the NFIA, which included failing to provide borrowers with a “Notice of Special Flood Hazard and Availability of Federal Disaster Relief Assistance” in a timely fashion.

    Also on the list are four Section 19 orders, which allow applicants to participate in the affairs of an insured depository institution after having demonstrated “satisfactory evidence of rehabilitation,” and three terminations of consent orders, among others.

    There are no administrative hearings scheduled for March 2018. The FDIC database containing all 12 enforcement decisions and orders may be accessed here.

    Federal Issues FDIC Enforcement Flood Insurance

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  • FTC files charges against operations that target elder Americans as part of DOJ’s elder fraud enforcement sweep

    Federal Issues

    On February 22, the FTC announced two separate legal actions taken against individuals and their operations for allegedly engaging in schemes exploiting elder Americans. The two cases are part of an enforcement sweep spearheaded by the DOJ in conjunction with the FBI, the FTC, the Kansas Attorney General, and foreign law enforcement agencies, which—according to a press release issued the same day by the DOJ—includes cases from around the globe involving over 250 defendants accused of victimizing more than a million U.S. citizens, the majority of whom are elderly. Charges were brought against both transnational criminal organizations and individuals who allegedly engaged in schemes including (i) mass mailings; (ii) telemarketing and investment frauds; and (iii) guardian identity theft. 

    According to the FTC’s announcement, charges were brought against two individuals and their sweepstake operation accusing them of allegedly bilking consumers out of tens of millions of dollars though personalized mailers that falsely implied the recipients had won or were likely to win a cash prize if they paid a fee. Since 2013, the FTC claims consumers have paid more than $110 million towards the scheme. The second complaint was brought against a group of telemarketers who claimed their software and technical support services would prevent cyber threats. However, the FTC alleges that the telemarketers instead charged up to tens of thousands of dollars for “junk” software or older software available for free or for a much lower price, and communicated “phony” reasons for consumers to purchase additional software to avoid the risk of new threats.

    Federal Issues DOJ FTC Elder Financial Exploitation State Attorney General Enforcement

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  • CFTC offers large reward to “pump-and-dump” scheme whistleblowers


    On February 15, the Commodity Futures Trading Commission (CFTC) issued a Consumer Protection Advisory on virtual currency “pump-and-dump” schemes, which offers eligible whistleblowers between 10 and 30 percent of enforcement actions of $1 million or more, which result from the shared information. The notice cautions consumers against falling for the fraudulent “pump-and-dump” schemes, which capitalize on consumers’ fear of missing the potentially lucrative—yet volatile—cryptocurrency market. The advisory warns consumers that many of the perpetrators of these schemes use social media to promote false news reports and create fake urgency for consumers to buy the cryptocurrency immediately. Then, after the price reaches a certain level, the schemers sell their virtual currency and the price begins to fall.

    Fintech Virtual Currency CFTC Bitcoin Cryptocurrency Whistleblower Enforcement

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  • CFPB Succession: CFPB releases five-year strategic plan; Trump’s budget proposal suggests cuts

    Federal Issues

    On February 12, the CFPB released its five-year strategic plan, which establishes the agency’s long-term strategic goals with corresponding objectives and achievement strategies. The strategic plan also introduces a new stated mission for the CFPB, which is based on Sections 1011(a) and 1013(d) of the Dodd-Frank Act:

    “To regulate the offering and provision of consumer financial products or services under the Federal consumer financial laws and to educate and empower consumers to make better informed financial decisions.”

    The new mission focuses on regulation and education but is silent on enforcement, as compared to the Bureau’s previous mission:

    “The CFPB helps consumer financial markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.”

    In addition to the mission, with the exception of the achievement strategies, the plan’s goals and corresponding objectives are all also restatements of various sections of title X of the Dodd-Frank Act. According to the plan, the Bureau will act with “humility and moderation” in achieving the three stated goals, which are:

    • “Ensure that all consumers have access to markets for consumer financial products and services.”
    • “Implement and enforce the law consistently to ensure that markets for consumer financial products and services are fair, transparent, and competitive.”
    • “Foster operational excellence through efficient and effective processes, governance and security of resources and information.”

    Notable, are the strategies the Bureau has outlined to achieve its goals and objectives. Among others, these strategies include, (i) reviewing individual regulations for clarification opportunities and considering alternative approaches to regulation; (ii) enhancing institutional regulatory compliance to protect consumers from discrimination and UDAAP violations; (iii) focusing enforcement resources on institutions and product lines that pose the greatest risk to consumers; (iv) promoting the development of compliance technology solutions. The strategic plan also focuses on internal strategies to achieve the Bureau’s mission, such as, maintaining a responsive cybersecurity program and promoting budget discipline.

    The final strategic plan is a significant rewrite of the draft strategic plan published in October 2017 under the Bureau’s previous leadership (covered by InfoBytes here). The final plan represents a “more coherent strategic direction” compared to the draft version, according to a letter written by acting Director Mick Mulvaney, which accompanies the final plan.

    On the same day as the strategic plan was released, President Trump issued his 2019 budget proposal which outlines a plan to place the CFPB under the congressional appropriations process, cut the Bureau’s budget by more than $6 billion over 10 years, and restrict the Bureau’s enforcement authority of federal consumer financial laws. More InfoBytes details about the budget proposal are available here.

    Federal Issues CFPB Succession Bank Supervision Enforcement Consumer Education CFPB

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  • FTC seeks permanent injunction to stop alleged student loan debt relief scam

    Consumer Finance

    On February 7, the FTC announced it was charging a student loan debt relief operation with violations of the FTC Act and the Telemarketing Sales Rule (TSR) for allegedly engaging in deceptive practices when marketing and selling their debt relief services. According to the complaint, defendants contacted consumers through personalized mailers that falsely claimed borrowers had pre-qualified for federal loan assistance programs that would reduce their monthly debt payments to a fixed payment or result in total loan forgiveness. However, the FTC asserted that monthly payments under federal income-driven repayment programs vary from year to year due to fluctuations in income, and that most consumers do not meet the programs’ strict eligibility requirements. Among other things, defendants allegedly charged illegal up-front fees to purportedly enroll consumers in programs, accepted monthly payments that were not applied towards student loans, and collected monthly fees that consumers believed were being applied to their loans but instead were going towards unrelated “financial education” programs. According to the FTC, defendants have collected over $28 million since 2014. In connection with the telemarketing of student loan debt relief services, the FTC also charged defendants with TSR violations for allegedly collecting illegal upfront fees and misrepresenting “material aspects of their debt relief services.” The FTC is seeking a permanent injunction against defendants to prevent future violations, as well as redress for injured consumers through “rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies.”

    This action is part of the FTC’s enforcement initiative, Operation Game of Loans, which targets companies that engage in practices that harm student loan borrowers. (See previous InfoBytes coverage here.)

    Consumer Finance FTC Debt Relief Enforcement Student Lending

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  • CFPB Succession: Senators express concern over CFPB’s investigation into data breach; Otting praises Mulvaney; & more

    Federal Issues

    On February 7, a bipartisan group of 32 senators wrote to the CFPB expressing concerns over reports that the Bureau may have halted an investigation into a large credit reporting agency’s significant data breach. The letter requests specific information related to agency’s oversight over the issue, such as, (i) whether the CFPB has stopped an on-going investigation into the data breach and if so, why; (ii) whether the CFPB intends to conduct on-site exams of the credit reporting agency at issue; and (iii) if an investigation is on-going, details related to the steps taken in that investigation. Additionally, on February 6, during a House Financial Services Committee hearing on the Financial Stability Oversight Council (FSOC), Representative David Scott, D-Ga., addressed rumors that the CFPB has scaled back its investigation of a large credit reporting agency’s significant data breach. In response to Scott, Treasury Secretary Steven Mnuchin noted that, while he has not done so yet, he intends to discuss the matter with acting Director Mulvaney and at FSOC. According to reports, a spokesperson for the Bureau noted that Mulvaney takes data security issues “very seriously” but that the Bureau does not comment on open enforcement or supervisory matters. It has also been reported that the CFPB may be deferring to the FTC’s on-going investigation.

    Comptroller of the Currency, Joseph Otting, issued a statement on February 6 after meeting with Mulvaney about ways the CFPB and the OCC can work together to pursue each agency’s mission. Otting praised Mulvaney’s leadership of the agency and noted that the recent announcements regarding HMDA compliance and the payday rule reconsideration have “helped to reduce the burden on the banking system.” (Previously covered by InfoBytes here and here).

    On the same day, the CFPB announced that Kirsten Sutton Mork was selected as the new chief of staff for the agency. Mork had been serving as staff director of the House Financial Services Committee under Chairman Jeb Hensarling, R-Texas. Leandra English previously held the role of chief of staff, prior to her appointment as deputy director in late November. English’s litigation against the appointment of Mulvaney as acting director continues with the U.S. Court of Appeals for the D.C. Circuit and oral arguments have been set for April 12.   

    Federal Issues CFPB Succession Credit Rating Agencies Enforcement CFPB HMDA Payday Lending

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  • CFPB releases RFI on enforcement process

    Federal Issues

    On February 7, the CFPB released its third Request for Information (RFI) in a series seeking feedback on the bureau’s operations.  This RFI solicits public comment on “information to help assess the overall efficiency and effectiveness of [the bureau’s] processes related to the enforcement of federal consumer financial law.” The RFI broadly requests feedback on all aspects of the enforcement process but also highlights specific topics on which comment is requested, including (i) timing and frequency of communication from the Bureau during investigations, including information about the status of the investigation; (ii) length of investigations; (iii) the Notice and Opportunity to Respond and Advise (NORA) process, including whether invocation of the NORA should be mandatory and whether the bureau should afford subjects of potential enforcement actions the right to make an in-person presentation to bureau personnel prior to the bureau determining whether to initiate legal proceedings; (iv) civil money penalty (CMP) amounts, including whether the bureau should adopt a CMP matrix; (v) the standard provisions of consent orders; and (vi) how the bureau should coordinate its enforcement activity with federal or state agencies with overlapping jurisdictions. The RFI is expected to be published in the Federal Register on February 12. Comments will be due 60 days from publication.

    InfoBytes coverage of previous RFIs can be found here and here.  

    Federal Issues RFI CFPB CFPB Succession Enforcement

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