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Financial Services Law Insights and Observations

Federal Reserve issues enforcement actions for flood insurance, BSA/AML violations

Federal Issues Federal Reserve Enforcement Flood Insurance National Flood Insurance Act Bank Secrecy Act Anti-Money Laundering

Federal Issues

On May 16, the Federal Reserve Board (Board) announced an enforcement action against a Nebraska-based bank for allegedly violating the National Flood Insurance Act (NFIA) and Regulation H, which implements the NFIA. The consent order assesses a $69,000 penalty against the bank, but does not specify the number or the precise nature of the alleged violations. The maximum civil money penalty for a pattern or practice of violations under the NFIA is $2,000 per violation.

The same day, the Board issued an order of prohibition against a former employee and institution-affiliated party of an Illinois-based bank for allegedly engaging in unsafe and unsound lending practices, including engaging in improper lending practices and failing to implement adequate Bank Secrecy Act/anti-money laundering controls and training. The terms of the order prohibit the individual from, among other things, “participating in any manner in the conduct of the affairs of any financial institution or organization specified in section 8(e)(9)(A) of the [Federal Deposit Insurance Act],” or “voting for a director, or serving or acting as an institution-affiliated party.”

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