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  • California branch sentenced in BSA/AML obstruction case

    Financial Crimes

    On May 18, the U.S. District Court for the Southern District of California sentenced a Netherlands-based financial institution’s U.S. subsidiary for “impairing, impeding and obstructing” the OCC during its 2012 examination by concealing deficiencies in its Bank Secrecy Act and anti-money laundering (BSA/AML) compliance programs. As previously covered by InfoBytes, the branch plead guilty in February to one count of conspiracy to defraud the U.S. Government and agreed to pay over $368 million as a result of allowing “hundreds of millions of dollars in untraceable cash, sourced from Mexico and elsewhere, to be deposited into its rural bank branches” without conducting adequate BSA/AML review. In addition to the February plea agreement, the court sentenced the bank to a two-year term of probation and fined the bank $500,000, the maximum statutory fine.

    Financial Crimes OCC DOJ Bank Secrecy Act Anti-Money Laundering Settlement

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  • FHA extends foreclosure moratoriums for certain properties in Puerto Rico & U.S. Virgin Islands

    Federal Issues

    On May 16, the Federal Housing Administration (FHA) released Mortgagee Letter ML 2018-03 (ML 2018-03), which extends the 180-day foreclosure moratorium on FHA-insured properties in Puerto Rico & the U.S. Virgin Islands affected by Hurricane Maria for an additional 90 days. As previously covered by InfoBytes, in March, FHA extended the moratorium an additional 60 days to May 18. The foreclosure moratorium is now in effect, for properties that meet certain conditions, until August 16.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues FHA Disaster Relief Mortgages Foreclosure

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  • Trump repeals CFPB auto guidance, Mulvaney praises action; CFPB to reexamine ECOA requirements

    Federal Issues

    On May 21, President Trump signed resolution S.J. Res. 57, which repeals CFPB Bulletin 2013-02 on indirect auto lending and compliance with the Equal Credit Opportunity Act (ECOA). The president’s signature completes the disapproval process under the Congressional Review Act (CRA), which began after the Government Accountability Office (GAO) issued a letter in December 2017 to Senator Pat Toomey (R-Pa) stating that “the Bulletin is a general statement of policy and a rule” that is subject to override under the CRA. The Senate passed the disapproval measure in April and the House approved it in the beginning of May. (Previously covered by InfoBytes here.)

    The repeal responds to concerns that the bulletin improperly attempted to regulate auto dealers, which the Dodd-Frank Act excluded from the Bureau’s authority. In a statement after the president’s signing, CFPB acting Director Mick Mulvaney praised the action and thanked the president and Congress for “reaffirming that the Bureau lacks the power to act outside of federal statutes.” He also stated that the repeal “clarifies that a number of Bureau guidance documents may be considered rules for purposes of the CRA, and therefore the Bureau must submit them for review by Congress. The Bureau welcomes such review, and will confer with Congressional staff and federal agency partners to identify appropriate documents for submission.”

    Additionally, acting Director Mulvaney announced plans to reexamine the requirements of ECOA, “[g]iven a recent Supreme Court decision distinguishing between antidiscrimination statutes that refer to the consequences of actions and those that refer only to the intent of the actor.” Although the decision is not identified, it is likely the June 2015 Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., which concluded that disparate impact claims are permitted under the Fair Housing Act but acknowledged some limitations on its application. (Covered by a Buckley Sandler Special Alert.) 

     

    Federal Issues CFPB CFPB Succession Congressional Review Act U.S. Senate U.S. House ECOA Auto Finance Dodd-Frank Fair Lending

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  • CFPB updates TRID Small Entity Compliance Guide and Guide to Forms

    Agency Rule-Making & Guidance

    On May 15, the CFPB released the 2018 updated versions of the “Know Before You Owe” mortgage disclosure rule Small Entity Compliance Guide (versions 4.1 and 5.2) and Guide to Forms (versions 1.5 and 2.1). Because the optional compliance period with the 2017 TILA-RESPA Integrated Disclosure Rule (TRID) extends through October 1, the CFPB updated both versions of each guide. Additionally, all four versions are updated with the 2018 TRID changes (covered by InfoBytes here), which will become effective prior to the end of the 2017 optional compliance period.

    Agency Rule-Making & Guidance TRID Mortgages Mortgage Origination Regulation X Regulation Z Consumer Finance CFPB

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  • Macau real estate developer sentenced for bribing UN officials

    Financial Crimes

    On May 11, Judge Vernon S. Broderick of the SDNY sentenced a Macau real estate developer to 48 months in prison and ordered him to pay a $1 million fine, $302,977 in restitution, and forfeiture of $1.5 million.  In July 2017, a jury convicted the developer of two counts of violating the FCPA, one count of paying bribes and gratuities, one count of money laundering, and two counts of conspiracy.  The conduct centered on the developer’s role in bribing UN officials in order to build a new multi-billion dollar conference center in Macau.   

    Five other defendants have been charged; four have pleaded guilty to various charges, and one passed away and the charges against him were dismissed.  Of the guilty pleas, two are awaiting sentencing.  The other two received sentences of seven months (conspiracy to defraud the United States) and 20 months (bribery).

    Prior Scorecard coverage of this matter can be viewed here.

    Financial Crimes International FCPA Bribery

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  • FINRA, SEC reach settlements with Chinese broker-dealers over anti-money laundering compliance

    Financial Crimes

    On May 16, the Financial Industry Regulatory Authority (FINRA) and the SEC reached settlements (here and here) with a Chinese-based broker-dealer following an inquiry and investigation into the firm’s anti-money laundering (AML) programs. According to FINRA, the broker-dealer allegedly failed to implement reasonable processes to ensure that its AML programs were able to detect and report potentially suspicious transactions, particularly those concerning penny stocks. In addition, FINRA claimed the broker-dealer’s AML program compliance testing was “inadequate and failed to uncover any of the deficiencies in the firm’s trade monitoring.” In a separate investigation conducted by the SEC in conjunction with FINRA’s inquiry, the broker-dealer reached a settlement over allegations that it failed to, among other things, file suspicious activity reports as required under the Bank Secrecy Act or comply in a timely fashion with SEC record requests. Under the terms of the settlements, the broker-dealer agreed to pay $5.3 million to FINRA for systemic anti-money laundering compliance failures and $860,000 to the SEC. In agreeing to the settlements, the broker-dealer neither admitted nor denied the charges, but consented to the entry of the findings.

    The SEC’s investigation also resulted in settlements with a second broker-dealer and its AML officer for allegedly violating the Exchange Act and SEC financial recordkeeping and reporting requirements for not reporting the suspicious sales of billions of penny stock shares. The broker dealer agreed to pay a civil money penalty of $1,000,000 to the SEC, was censured, and was ordered to cease and desist from causing or committing any violations or future violations of the SEC’s suspicious activity reporting requirements. The AML officer was assessed a $15,000 civil money penalty and barred from association with any broker, dealer, investment advisor, municipal securities dealer, municipal advisor, transfer agency, or national recognized statistical rating organization for a period of three years, among other things.

    Financial Crimes FINRA SEC Enforcement Anti-Money Laundering Bank Secrecy Act Securities

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  • OFAC sanctions Iranian bank officials, Iraqi bank, and others for moving millions of dollars to Hizballah

    Financial Crimes

    On May 15, U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced it was imposing sanctions on the governor and a senior official of the Central Bank of Iran, an Iraqi bank and its chairman, and a key Hizballah official, for allegedly funneling millions of dollars on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) to Hizballah. Pursuant to Executive Order 13224, which “provides a means by which to disrupt the financial support network for terrorists and terrorist organizations by authorizing the U.S. government to designate and block the assets of foreign individuals and entities that commit, or pose a significant risk of committing, acts of terrorism,” the individuals and entities were designated as Specially Designated Global Terrorists. The actions, which follow a May 10 action taken against individuals and entities who materially assisted in the conversion of millions of U.S. dollars to fund IRGC-QF’s malignant activities, “seek to stifle Iran’s ability to abuse the U.S. and regional financial systems.”

    However, OFAC clarified that sanctions on the officials of the Central Bank of Iran do not extend to the bank itself. Following President Trump's decision to cease participation by the U.S. government in the Joint Comprehensive Plan of Action, sanctions on the bank will be re-imposed August 7, and on November 5, additional sanctions will be re-imposed on persons knowingly engaging in certain significant transactions with the Central Bank of Iran.

    Visit here for additional InfoBytes coverage on Iranian sanctions.

    Financial Crimes OFAC Department of Treasury Sanctions Iran Iraq International

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  • DOJ, CFPB agree to early termination of consent order with indirect auto lender

    Lending

    On May 15, the auto lending branch of an international automobile company (indirect auto lender) reported in an 8-K filing that the DOJ and CFPB had reached an agreement that the indirect auto lender has met the requirements for early termination of a consent order entered into in 2016 over allegations of unfair lending practices. As previously covered in InfoBytes, a joint agency investigation under ECOA found that the indirect auto lender’s policies allowed for dealers to mark up a consumer’s interest rate on the retail installment contract above the established risk-based buy rate. The parties currently await final court approval of a joint stipulation and proposed order for early termination of the consent order from three years to two years in the U.S. District Court for the Central District of California.

    Lending Fair Lending DOJ CFPB ECOA Auto Finance Consumer Finance

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  • Georgia amends state code provisions related to financial institutions

    State Issues

    On May 3, the Georgia governor signed into law an act amending provisions of the Official Code of Georgia applicable to the state’s Department of Banking and Finance (Department) and financial institutions generally, including banks, credit unions, licensed sellers of payment instructions, and mortgage lenders and brokers. Among other things, HB 780 grants the Department and/or its commissioner (i) powers to authorize state chartered financial institutions to exercise powers authorized by federal law but not authorized under state law; (ii) the authority to remove individuals employed by state chartered financial institutions, including officers and directors; and (iii) the ability to establish a process for state chartered financial institutions to “exercise rights and powers authorized solely under federal law.” HB 870 also amends the Official Code of Georgia to provide for the Department’s licensing of mortgage lenders and brokers. The law took effect on May 3, and does not apply to litigation pending as of March 9.

    State Issues State Legislation Mortgages Bank Compliance

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  • Maryland announces settlement with mortgage servicer over property inspection fees

    State Issues

    On May 14, the Maryland Attorney General announced a settlement with a mortgage loan servicer to resolve allegations that it charged homeowners illegal inspection fees. According to the announcement, the servicer allegedly charged borrowers for property inspections that were done when the borrower was in default on their payments, in violation of a Maryland law, which prohibits passing on such inspection costs. The mortgage servicer ceased the practice in 2014  for forward mortgages and in 2016 for reverse mortgages, according to the Attorney General’s office. The settlement requires the mortgage servicer to (i) refrain from engaging in the same practice in the future; (ii) complete the return of almost $1 million in collected inspection fees; and (iii) pay nearly $500,000 in penalties and costs.

    State Issues Mortgage Servicing Settlement Home Inspection State Attorney General

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