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OCC releases bank supervision operating plan for FY 2021
On October 1, the OCC’s Committee on Bank Supervision released its bank supervision operating plan (plan) for fiscal year 2021. The plan outlines the agency’s supervision priorities and highlights several supervisory focus areas including: (i) credit risk management; (ii) commercial and residential real estate concentration risk management, with a focus in areas heavily impacted by the Covid-19 pandemic; (iii) allowances for loan and lease losses; (iv) cybersecurity and operational resiliency; (v) Bank Secrecy Act/anti-money laundering compliance; (vi) compliance risk management related to Covid-19-related bank activities; (vii) Community Reinvestment Act performance; (viii) fair lending examinations and risk assessments; (ix) LIBOR phase-out preparations; (x) oversight of significant third-party relationships; (xi) change management to address significant operational changes; and (xii) payment systems products and services. The plan will be used by OCC staff members to guide the development of supervisory strategies for individual national banks, federal savings associations, federal branches, federal agencies, and technology service providers.
The OCC will provide updates about these priorities in its Semiannual Risk Perspective, as InfoBytes previously has covered.
CFTC reaches $4.5 million settlement with bank over lost audio files
On September 28, the CFTC announced a $4.5 million settlement with a national bank and two affiliated entities to resolve allegations that they failed to preserve audio files, including trader recordings that were subpoenaed in 2017. According to the CFTC, in early 2018 the bank stated that it had directed staff to preserve the recordings and asked for an extension to turn over the requested audio files. The Commission granted the request. In late 2018, the bank, however, said the audio files had been deleted due to a design flaw in its audio preservation system. The CFTC claimed that the bank was aware of the audio-preservation issue as early as 2014. As such, according to the CFTC, the bank “did not maintain adequate internal controls with respect to its preservation of audio and thus failed to diligently supervise matters related to its business as a CFTC registrant.” The entities did not admit or deny the CFTC’s findings, but have agreed to pay the $4.5 million civil penalty plus post-judgment interest.
CSBS announces first MSB Accreditation
On September 28, the Conference of State Bank Supervisors (CSBS) announced that the Ohio Division of Financial Institutions received its first Money Service Business (MSB) Accreditation. According to the announcement, the MSB Accreditation—which is offered by CSBS together with the Money Transmitter Regulators Association—certifies that the “state has the resources and necessary processes in place to ensure MSBs in that state operate safely and soundly, follow BSA/AML standards and abide by state and federal consumer protection laws.”
The Accreditation is part of the CSBS Vision 2020 program. Find continuing InfoBytes coverage on CSBS Vision 2020 here.
New York AG takes action against debt collection operation
On September 25, the New York attorney general announced a temporary restraining order was granted against a debt collection operation (consisting of a leader and at least six other individuals and entities) for allegedly contacting consumers using deceptive and abusive collection tactics. According to the press release, the operation allegedly contacted consumers by spoofing phone numbers to appear associated with the local court house or sheriff’s office in order to impersonate government officials and threaten the consumers with false legal action in order to collect debts, in violation of the state laws, the FDCPA, and the Truth in Caller ID Act of 2009. The temporary restraining order prohibits the operation from engaging in debt collection practices and freezes the corporate defendants’ assets. The operations’ leader is also allegedly in breach of a 2014 Assurance of Discontinuance with the AG for previous violations of the FDCPA.
The AG is seeking a permanent injunction, disgorgement, restitution, and civil penalties.
Massachusetts Securities Division extends relief from certain filing requirements
On September 30, the Massachusetts Securities Division issued an amended Emergency Notice extending temporary relief from signature and notarization requirements in corporate filings and for registered financial professional filings until October 31. As under previous iterations of the notice (covered here and here), the Division will allow electronic signatures or copies of signed documents for securities applications and securities notice filings among others. However, the temporary waiver of notarization requirements for certain corporate finance filings and the CORI form, and relief from annual update filings and document delivery requirements for investment advisers were not extended.
HUD OIG: FHA mortgage servicers’ Covid-19 information still misleading
On September 30, the HUD, Office of the Inspector General (HUD OIG) issued a follow-up study examining the information on mortgage loan servicers’ websites about the CARES Act loan forbearance provisions. As previously covered by InfoBytes, in April, HUD OIG issued consumer guidance noting that among the top 30 FHA mortgage servicers, information on forbearance options under the CARES Act was found to be incomplete, outdated, inconsistent, or unclear. On August 11, HUD OIG reviewed the “readily available” Covid-19 pandemic information on the websites of the same top 30 FHA mortgage servicers, noting that some of the servicers still provided misleading forbearance information. Among other things, HUD OIG found that certain mortgage servicers (i) did not offer clear information on the length of the initial forbearance period; (ii) did not make it clear that borrowers could qualify for forbearance extensions after the initial 180 day period; and (iii) did not clearly state that forbearance is an option for borrowers.
Federal Reserve Board extends measures to ensure high level of resilience among large banks
On September 30, the Federal Reserve Board announced it would extend measures previously instituted to ensure that large banks maintain a high level of capital resilience in light of uncertainty introduced by the Covid-19 outbreak. The measures were extended for an additional quarter. Large banks (i.e. banks with more than $100 billion in total assets) will be prohibited from making share repurchases. Additionally, dividend payments will be capped and tied to a formula based on recent income. The announcement notes that the Board will conduct a second stress test later this year to further test the resiliency of large banks.
DOJ: Lender allegedly violated FIRREA, False Claims Act by forging certifications and using unqualified underwriters
On September 25, the DOJ filed a complaint against a lender alleging that it forged certifications and used unqualified underwriters to approve FHA-insured Home Equity Conversion Mortgages (HECMs) to increase its loan production in violation of the Financial Institutions Reform, Recovery and Enforcement Act and the False Claims Act. In addition, the DOJ claims that, because the lender allegedly did not employ enough direct endorsement underwriters to review each HECM loan endorsed for FHA mortgage insurance, it bypassed FHA’s underwriter requirements and (i) allowed “unqualified temporary contractors to underwrite, approve, and sign certifications for HECM loans”; (ii) “[f]orged signatures of qualified underwriters on certifications for other HECM loans” to create the appearance that they had been reviewed and approved by a qualified underwriter; (iii) pre-signed blank certifications representing that appraisals had been reviewed and approved; and (iv) used these forms and certifications to insure HECM loans that did not meet the underwriting requirements. The DOJ alleges that, accordingly, the FHA insured overvalued and underwater properties, which increased borrower expenses and raised the chances of default. The DOJ also asserts that the lender’s purported false claims for FHA mortgage insurance payments were material, as it led to the government making payments it would otherwise not have been required to make.
FinCEN Director encourages specificity in Covid-19 SARs filings
On September 29, FinCEN Director Kenneth A. Blanco spoke at the Association of Certified Anti-Money Laundering Specialists (ACAMS) virtual AML conference, noting that FinCEN has received over 91,000 suspicious activity reports (SARs) referencing Covid-19 and the federal stimulus programs under the CARES Act. Blanco stated that the vast majority (about 71 percent) of the Covid-19 SARs have come from depository institutions, while 17 percent have come from credit unions and five percent have come from the Money Services Business (MSB) industry. The securities and casino industries account for the final three percent. Blanco urged financial institutions to be “as specific as possible” when filling out their Covid-19-related SARs to ensure it gets to the right investigative team expeditiously. Blanco noted that “vague references to ‘stimulus’ or ‘CARES Act’ or ‘benefit,’” hinders the agency’s ability to get the SAR to the right team. Additionally, Blanco emphasized FinCEN’s advisories and guidance related to Covid-19 fraud (covered by InfoBytes here, here, and here) and encouraged the audience to review the agency’s dedicated Covid-19 webpage.
FDIC releases August enforcement actions
On September 25, the FDIC released a list of administrative enforcement actions taken against banks and individuals in August. During the month, the FDIC issued 13 orders, consisting of “one consent order under 8(b), four orders of prohibition under 8(e), and eight Section 19 orders.” The consent order, issued against a Kansas-based bank, relates to alleged violations of the Bank Secrecy Act (BSA). Among other things, the bank was ordered to (i) terminate all activity related to its foreign financial institution customers, including such activity as funds transfers, remote deposit capture, money service business remittances, Automated Clearing House transfers, and funds transfers to or from any foreign central bank accounts; (ii) establish a directors’ BSA/anti-money laundering (AML) compliance committee; (iii) implement a revised BSA compliance program to address BSA/AML deficiencies, including incorporating internal controls to assure ongoing compliance, as well as training for appropriate personnel; (iv) maintain a BSA/AML internal control structure, including suspicious activity monitoring and reporting, risk assessment, and customer due diligence; (v) contract with a third-party consulting firm to conduct an independent test of the bank’s BSA/AML compliance program; (vi) implement an effective, comprehensive BSA training program for appropriate personnel regarding specific compliance responsibilities; and (vii) conduct a look-back review to ensure certain reportable transactions and suspicious activities were appropriately identified and reported.