InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
FinCEN updates AML/CFT deficiencies list
On March 11, the Financial Crimes Enforcement Network (FinCEN) issued an advisory identifying updates to the Financial Action Task Force’s (FATF) list of jurisdictions with strategic anti-money laundering and combating the financing of terrorism (AML/CFT) and counter-proliferation financing deficiencies. The advisory notes that in response to the Covid-19 pandemic, FATF “prioritized its review by focusing on jurisdictions with expired or expiring action plan deadlines,” and provided jurisdictions identified under “increased monitoring” the option to provide a status report. FinCEN’s advisory reminds members that its February 2020 statement High-Risk Jurisdictions Subject to a Call for Action remains in effect and urges “all jurisdictions to impose countermeasures on Iran and the Democratic People’s Republic of Korea (DPRK) to protect the international financial system from significant strategic deficiencies in their AML/CFT regimes.” The advisory also notes that last month FATF updated its Jurisdictions under Increased Monitoring document, adding Burkina Faso, Cayman Islands, Morocco, and Senegal. Further, the advisory provides AML program risk assessment considerations and suspicious activity report filing guidance.
DFPI reiterates “aggressive” enforcement during pandemic
On March 11, the California Department of Financial Protection and Innovation (DFPI) released a statement discussing the regulator’s expanded consumer protection efforts during the Covid-19 pandemic. Among other things, DFPI noted that it is “aggressively exercising its new authority to regulate a large group of newly covered financial services, including debt collectors, credit reporting and credit repair agencies, debt relief agencies and others,” and verifying compliance with state and federal laws protecting homeowners from “coronavirus-related foreclosures.” DFPI also stated it issued a cease-and-desist order filed against a student loan debt relief company (covered by InfoBytes here), and launched an investigation of lender efforts to evade state interest rate caps.
New York governor signs bill setting forth eviction and foreclosure protections for small businesses
On March 9, the New York governor signed the COVID-19 Emergency Protect Our Small Businesses Act of 2021 (S471A/A3207), which sets forth eviction and foreclosure protections for small businesses. Among other things, the act prohibits removal of a commercial tenant prior to May 1, 2021, except by eviction proceedings. The act also prohibits the initiation of eviction proceedings until May 1, 2021 and stays pending eviction proceedings for a certain period of time depending on whether an eviction warrant or judgment of possession or ejectment has been issued. The act further requires landlords to provide certain pre-eviction notices. The press release notes that the act builds on prior state moratoriums on residential and commercial evictions.
SEC issues more than $6.5 million in whistleblower awards
On March 9, the SEC announced an approximately $1.5 million whistleblower award in connection with a successful enforcement action. According to the redacted order, the whistleblower provided information that led to the opening of the investigation, and assisted enforcement staff by providing multiple written submissions and identifying potential witnesses. The whistleblower also met with enforcement staff multiple times to explain information.
Earlier, on March 4, the SEC announced a more than $5 million joint award to two whistleblowers who alerted enforcement staff to misconduct occurring abroad that would otherwise “have been difficult to detect.” According to the redacted order, the whistleblowers voluntarily submitted a joint tip that led to the opening of the investigation, and continued to assist enforcement staff by providing information that directly supported certain allegations in the enforcement action. However, in the same order, the SEC affirmed denial of two other claimants’ award claims after determining that the individuals did not submit information leading to the successful enforcement of the covered action. The SEC noted, among other things, that these claimants’ tips did not cause the opening of the investigation and that the information provided related to conduct by “entirely different companies” and was not used in the covered action.
The SEC has now paid approximately $759 million to 143 individuals since the inception of the whistleblower program in 2012.
OFAC sanctions Mexican national linked to narcotics trafficking
On March 3, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to the Foreign Narcotics Kingpin Designation Act against a Mexican national “for his high-level role in facilitating drug shipments and money laundering for the Cartel de Jalisco Nueva Generacion (CJNG).” According to OFAC, the individual materially assisted in, provided financial or technological support for or to, or provided goods or services in support of, CJNG activities. The designated individual joins other previously designated businesses and individuals linked to CJNG for playing “critical roles in CJNG’s drug trafficking activities, including money laundering.” As a result of the sanctions, the designated individual’s property located in the U.S. or held by U.S. persons is blocked and must be reported to OFAC. Additionally, OFAC regulations generally prohibit U.S. persons from participating in transactions with the designated individual.
Virginia reaches settlement with open-end credit plan lender
On March 4, the Virginia attorney general announced a settlement with an open-end credit plan lender, resolving allegations that the company violated Virginia consumer finance laws by (i) imposing a $100 origination fee on loans during a statutorily-mandated finance charge-free grace period; (ii) “[e]ngaging in a pattern of repeat transactions and ‘rollover’ loans with thousands of consumers who were required to close accounts that they paid down to a $0 balance,” but were then allowed to open new accounts for which new fees were charged on a monthly basis; and (iii) charging interest on accounts at an annual rate of 273.75 percent, far exceeding the 36 percent limit that open-end credit lenders are allowed to charge. Under the terms of the settlement, the company is permanently enjoined from further violating Virginia’s consumer finance laws, and is required to pay $850,000 in restitution and $150,00 in attorneys’ fees and settlement costs. The company must also provide more than $10 million in debt forbearance on “accounts that remain unpaid and that were not converted to a separate loan program in October 2018.”
Treasury announces Emergency Capital Investment Program for CDFIs and MDIs
On March 4, the U.S. Treasury Department announced a new initiative to provide access to capital for communities traditionally excluded from the financial system that have significantly struggled during the Covid-19 pandemic. The Emergency Capital Investment Program (ECIP), established by the Consolidated Appropriations Act of 2021, will provide up to $9 billion in capital directly to Community Development Financial Institutions (CDFIs) and minority depository institutions (MDIs) to provide, among other things, “loans, grants, and forbearance for small and minority businesses and consumers in low income communities.” The ECIP will set aside $2 billion for CDFIs and MDIs with less than $500 million in assets, as well as $2 billion for CDFIs and MDIs with less than $2 billion in assets. Treasury notes that the program is intended to incentivize impactful lending, and states it is currently “developing additional ‘deep impact’ metrics to further incentivize targeted investments by participants in those communities most in need of capital.” Institutions seeking to participate in the ECIP can access application instructions and materials along with an application portal here.
To support the implementation of the ECIP, the FDIC, Federal Reserve Board, and the OCC issued an interim final rule to “revis[e] their capital rules to provide that Treasury’s investments under the program qualify as regulatory capital of insured depository institutions and holding companies.” The interim final rule is effective immediately upon publication in the Federal Register. Comments will be accepted for 60 days following publication.
OCC updates SCRA Comptroller’s Handbook booklet
On March 4, the OCC issued Bulletin 2021-11 announcing the revision of the Servicemembers Civil Relief Act (SCRA) booklet of the Comptroller’s Handbook. The booklet rescinds the 2011 version and provides background information and examination procedures on consumer protections afforded servicemembers under the SCRA. Among other things, the revised booklet (i) summarizes SCRA protections and requirements; (ii) discusses compliance, operational, strategic, and reputation risks associated with a bank’s SCRA activities; (iii) discusses risk management practices for effective SCRA compliance; and (iv) includes procedures for examining banks’ compliance with the SCRA.
FDIC updates Consumer Compliance Examination Manual
On March 2, the FDIC announced updates to its Consumer Compliance Examination Manual (CEM). The CEM includes supervisory policies and examination procedures for FDIC examination staff evaluating financial institutions’ compliance with federal consumer protection laws and regulations. The recent updates include, among other things, changes to the sections and questions related to (i) fair lending laws and regulations and the Fair Lending Scope and Conclusions Memorandum; (ii) TILA and the Consumer Leasing Act; and (iii) the asset-based definitions for small, intermediate, and large institutions for the Community Reinvestment Act.
FDIC announces Oklahoma winter storm relief
On March 3, the FDIC issued FIL-13-2021 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Oklahoma affected by severe winter storms. The guidance notes that the FDIC will consider the unusual circumstances faced by institutions affected by the winter storms. The guidance highlights suggest that institutions work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans to those affected by the severe weather, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC notes that institutions “may receive Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider relief from certain reporting and publishing requirements.