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  • OCC highlights supervisory priorities in fall 2017 semiannual risk report

    Federal Issues

    On January 18, the OCC announced the release of its Semiannual Risk Perspective for Fall 2017, identifying key risk areas for national banks and federal savings associations. Top supervisory priorities will focus on credit, operational, and compliance risk. As previously discussed in the spring 2017 semiannual report, compliance risk continues to be an ongoing concern, particularly as banks continue to adopt new technologies to help them comply with anti-money laundering rules and the Bank Secrecy Act (BSA), in addition to addressing increased cybersecurity challenges and new consumer protection laws. (See previous InfoBytes coverage here.) The OCC commented that these types of risks can be mitigated by banks with “appropriate due diligence and ongoing oversight.”

    Specific areas of particular concern include the following:

    • easing of commercial credit underwriting practices;
    • increasing complexity and severity of cybersecurity threats, including phishing scams that are the primary method of breaching bank data systems;
    • using limited third-party service providers for critical operations, which can create “concentrated points of failure resulting in systemic risk to the financial services sector”;
    • compliance challenges under the BSA; and
    • challenges in risk management involving consumer compliance regulations.

    The report also raises concerns about new requirements under the Military Lending Act along with pending changes to data collection under the Home Mortgage Disclosure Act, which could pose compliance challenges. It further discusses a new standard taking effect in 2020 for measuring expected credit losses, which “may pose operational and strategic risk to some banks when measuring and assessing the collectability of financial assets.”

    The data relied on in the report was effective as of June 30, 2017.

    Federal Issues Agency Rule-Making & Guidance OCC Risk Management Bank Regulatory Third-Party Bank Secrecy Act HMDA Military Lending Act Vendor Management Anti-Money Laundering Privacy/Cyber Risk & Data Security

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  • Agencies adjust civil penalties for inflation

    Agency Rule-Making & Guidance

    On January 12, the CFPB published a final rule adjusting upward the maximum amount of each civil penalty within their jurisdictions, as required by the Inflation Adjustment Act. As explained in the rule, the new maximum penalty amounts for 2018 are calculated by multiplying the corresponding 2017 penalty by a “cost-of-living adjustment” multiplier—which for 2018 has been set by the OMB at 1.02041—and then rounding to the nearest dollar. The new penalty amounts apply to civil penalties assessed after January 15, 2018.

    In addition, the FDIC, the OCC, and the Federal Reserve recently issued similar Civil Penalty Inflation Adjustment notices.

    Agency Rule-Making & Guidance CFPB OCC FDIC Civil Money Penalities

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  • OCC fines national bank for failing to fix BSA deficiencies

    Financial Crimes

    On January 4, the OCC issued a consent order assessing a $70 million civil money penalty against a national bank for failing to comply with the agency’s 2012 cease and desist consent order related to Bank Secrecy Act (BSA) and anti-money laundering (AML) deficiencies. The 2012 order cited the bank for, among other things, failing to file suspicious activity reports in a timely manner and weaknesses in controls related to its correspondent banking from deposit capture/international cash letter instrument activity. According to the OCC, the $70 million civil money penalty results from the bank’s failure “to complete corrective actions to address BSA/AML compliance issues as required by the [2012] order.”

    Financial Crimes OCC Bank Secrecy Act Anti-Money Laundering SARs

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  • Agencies finalize plans to further streamline Call Reports

    Agency Rule-Making & Guidance

    On January 3, the Federal Reserve Board, FDIC, and OCC (agencies)—as members of the Federal Financial Institutions Examination Council (FFIEC)—announced finalized plans to reduce data reporting requirements and other regulatory requirements associated with the Consolidated Reports of Condition and Income (Call Reports) for financial institutions. According to the FFIEC, after reviewing comments related to the joint June 2017 proposal, the finalized changes will include:

    • Reducing or remove the reporting frequency for approximately seven percent of the data items required on the Call Report for small institutions, effective June 30, 2018; and
    • Revising Call Report schedules to align with the changes in accounting for equity securities, effective March 21, 2018.

    The FFIEC noted that the agencies will not proceed with their June 2017 proposal to revise the instructions for determining past due status.

    In addition to the June 2017 proposal, previous requests for proposed burden-reducing Call Report revisions were submitted by the agencies in August 2016 and November 2017 (see InfoBytes’ coverage of the August request here and the November request here).

    Agency Rule-Making & Guidance Federal Reserve FDIC OCC Call Report

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  • Agencies Release CRA Asset-Size Threshold Adjustments

    Agency Rule-Making & Guidance

    On December 21, the Federal Reserve, the OCC, and the FDIC (collectively, the “Agencies”) jointly announced the adjusted thresholds for asset-size used to define “small” and “intermediate small” banks and savings associations under the Community Reinvestment Act (CRA). Effective January 1, 2018, a small bank or savings association will be defined as an institution that, as of December 31 of either of the past two calendar years, had assets of less than $1.252 billion. Additionally, an “intermediate small” bank or “intermediate small” savings association will be defined as an institution with at least $313 million and less than $1.252 billion in assets as of December 31 of either of the past two calendar years. The agencies published the annual adjustments in the Federal Register on December 27.

    Agency Rule-Making & Guidance CRA OCC Federal Reserve FDIC Federal Register

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  • Financial Regulators Issue Joint Supervisory Guidance for Disaster Areas; VA Announces Wildfire Relief

    Federal Issues

    On December 15, the FDIC, Fed, OCC, and NCUA issued Interagency Supervisory Examiner Guidance for Institutions Affect by a Major Disaster (Guidance). The Guidance provides information on assessing the financial condition of institutions affected by a “major disaster with individual assistance” as declared by the President. The Guidance also encourages institutions affected by such disasters to discuss relevant issues with their examiners and notes that the supervisory agencies will consider extending report filing deadlines and rescheduling exams. Additionally, the Guidance states that examiners should consider factors related to the disaster, such as asset losses and staffing issues, when assessing capital adequacy and management capability requirements. And when considering the supervisory response to an institution that receives a lower component or composite rating, the Guidance provides that examiners should recognize the extent to which any weaknesses are related to the major disaster.

    The Department of Veterans Affairs (VA), on December 12, announced additional special relief following the California wildfires in Circular 26-17-42. The Circular encourages VA loan holders to extend forbearance to borrowers affected by the wildfires and VA loan servicers to continue solicitation of the VA Disaster Loan Modification program (as previously covered by InfoBytes here). Additionally, for affected borrowers and loans, the Circular suggests that loan holders follow the 90-day foreclosure moratorium and that servicers consider waiving late charges and suspending credit reporting. The Circular is effective until January 1, 2019.

    Find continuing InfoBytes coverage on Disaster Relief here.

    Federal Issues Disaster Relief Department of Veterans Affairs FDIC OCC NCUA Federal Reserve Mortgages

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  • OCC Recent Enforcement Actions Target BSA/AML Compliance Programs and National Flood Insurance Act Violations

    Federal Issues

    On December 14, the OCC released a list of recent enforcement actions taken against national banks, federal savings associations, and individuals currently and formerly affiliated with such parties. The new enforcement actions include cease and desist orders, civil money penalty orders, removal/prohibition orders, and restitution orders. The list also includes recently terminated enforcement actions.

    Cease and Desist Order. On November 9, the OCC issued a consent order (2017 Order) two days after converting a Japanese bank’s two New York branches under the supervision of the New York Department of Financial Services (NYDFS) to federally licensed branches under the supervision of the OCC. As part of the OCC’s approval process, the bank’s federal branches and New York branches agreed to the issuance of the 2017 Order, which requires adherence to “remedial provisions . . . substantively the same as those” in consent orders entered into in 2013 and 2014 with NYDFS. The previously issued consent orders addressed deficiencies related to the bank’s Bank Secrecy Act/Anti-Money Laundering (BSA/AML) sanctions compliance programs, specifically concerning the removal of key warnings to regulators on transactions with sanctioned countries.

    The 2017 Order, among other things, requires the bank to: (i) submit an action plan on enhancing internal controls and updating policies and procedures to correct BSA/AML deficiencies, address provisions applicable under the Office of Foreign Assets Control’s requirements, and implement requirements outlined in the 2013 and 2014 consent orders; (ii) ensure adherence to the action plan and 2017 Order under the direction of the bank’s general manager; (iii) submit a management oversight plan designed to improve and enhance the bank’s sanctions compliance programs; and (iv) prevent the retention or future engagement of any individual identified and “barred by the 2014 Consent Order from engaging, directly or indirectly, in any duties, responsibilities, or activities at or on behalf of the [b]ank or the [b]ank’s affiliates that involve their banking business in the [U.S.].” The 2017 Order does not require the bank to pay a civil monetary penalty.

    Civil Monetary Penalty. On October 10, the OCC assessed a $452,000 civil monetary penalty against a national bank lender for alleged violations of the National Flood Insurance Act and/or the Flood Disaster Protection Act. The bank agreed to pay the penalty without admitting or denying any wrongdoing. 

    Federal Issues OCC Enforcement Compliance Bank Secrecy Act Anti-Money Laundering OFAC NYDFS Financial Crimes Flood Insurance Sanctions

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  • Judge Dismisses OCC Fintech Charter Challenge

    Fintech

    A U.S. District Court Judge dismissed the New York Department of Financial Services’ (NYDFS) challenge to the OCC’s proposed federal charter for fintech firms.  (See previous InfoBytes coverage here.) In the December 12 order, the judge agreed with the OCC that the court lacked subject matter jurisdiction over NYDFS’ claims because the OCC has yet to finalized its plans to actually issue fintech charters. The case was dismissed without prejudice.

    As previously covered by InfoBytes, the Conference of State Bank Supervisors (CSBS) has also filed a lawsuit, which challenges the same statutory authority allowing the OCC to create charters for fintech companies. The CSBS lawsuit is still active. 

    Fintech Courts OCC NYDFS Litigation

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  • OCC Allows Closure of Certain Financial Institutions Affected by Wildfires in California

    Federal Issues

    The OCC issued a proclamation on December 7 allowing national banks and federal savings associations affected by wildfires in California to close. The OCC encouraged the affected offices to make every effort to reopen as quickly as possible and to consult OCC Bulletin 2012-28 for guidance on certain actions the institutions should consider implementing for customers in affected disaster areas, previously covered by InfoBytes here

    Federal Issues OCC Disaster Relief Consumer Finance

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  • Continuing Resolution Extends National Flood Insurance Program Deadline to December 22

    Federal Issues

    As previously reported in InfoBytes, the House voted 237-189 on November 14 to pass legislation reforming and reauthorizing the National Flood Insurance Program (NFIP) for five years before it expired at the beginning of December. A continuing resolution (H.J. Res. 123), passed by both the Senate and House and signed into law by President Trump on December 8, amended the expiration date of Fiscal Year 2018 appropriations to December 22, and extended the NFIP another two weeks. The Senate Banking Committee is still waiting to act on a flood insurance bill. 

    Federal Issues OCC Bank Regulatory National Flood Insurance Program Trump

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