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Financial Services Law Insights and Observations

FDIC releases April enforcement actions

Federal Issues FDIC Enforcement Bank Secrecy Act EFTA RESPA TILA National Flood Insurance Program HMDA Regulation O

Federal Issues

On May 29, the FDIC released a list of administrative enforcement actions taken against banks and individuals in April. The FDIC issued 23 orders and 2 notices of changes, which “consisted of 12 Section 19 orders, 3 orders of prohibition, 1 order to pay, 3 consent orders, 1 order to cease and desist, 4 orders terminating consent orders, and 1 order terminating an order of restitution.” Among the actions is a cease and desist order and civil money penalty issued against a Louisiana-based bank for allegedly violating the Bank Secrecy Act, EFTA, RESPA, TILA, the National Flood Insurance Program, and HMDA. The order follows the issuance of a 2019 recommended decision on remand by an FDIC administrative law judge (ALJ), who also found that the bank failed to comply with a majority of the provisions outlined in a 2011 memorandum of understanding entered into with the FDIC two years prior to the filing of this action. Specifically, the recommended decision found that the bank, among other things, “violated the independence requirement of the FDIC’s rules and regulations pertaining to appraisals by allowing a lending officer originating loans to appraise the collateral underlying the loan,” and “allow[ing] a high ranking officer to repeatedly overdraw his bank account without being charged overdraft fees” in violation of Regulation O of the Federal Reserve Board. Other violations included that the bank failed to: (i) conduct independent property evaluations and appraisals; (ii) disclose unauthorized fees or investigate reports of erroneous charges; (iii) assess flood insurance needs or inform borrowers of force-placed flood insurance rules; (iv) file suspicious activity reports and currency transaction reports; (v) implement a “meaningful compliance program” to ensure the bank did not engage in foreign financial transactions with prohibited persons identified by the Office of Foreign Assets Control; and (v) “conduct proper compliance training or maintain an effective audit program for consumer compliance matters.” The FDIC’s order affirmed the ALJ’s recommended decision to subject the bank to an order to cease and desist and pay a $500,000 civil money penalty.

Additionally, the FDIC entered a consent order against an Illinois-based bank relating to alleged weaknesses in its Bank Secrecy Act compliance program.

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