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  • OFAC sanctions Saudi persons for human rights abuse

    Financial Crimes

    On February 26, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Saudi Arabia’s former Deputy Head of General Intelligence Presidency and Saudi Arabia’s Rapid Intervention Force in connection with the death of a Saudi journalist. The sanctions are taken pursuant to Executive Order 13818, which implements the Global Magnitsky Human Rights Accountability Act and “targets perpetrators of serious human rights abuse and corruption around the world.” As a result of the sanctions, all of the property and interests in property of the designated persons that are in the United States or in the possession or control of U.S. persons, as well as any entities that are owned 50 percent or more by the designated persons, are blocked and must be reported to OFAC. Additionally, OFAC regulations prohibit U.S. persons from participating in transactions with the designated persons unless exempt or otherwise authorized by an OFAC general or specific license.

    Financial Crimes OFAC Department of Treasury SDN List Sanctions Of Interest to Non-US Persons OFAC Designations Saudi Arabia

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  • FATF advances guidance on measures to combat terrorist and proliferation financing

    Financial Crimes

    On February 25, the U.S. Treasury Department announced that the Financial Action Task Force (FATF) concluded another plenary meeting, in which it “advanced its work on several important issues, including finalizing a non-public report on terrorist financing and agreeing to seek public comment on updated guidance documents on virtual assets and proliferation finance.” Among other things, FAFT finalized three non-public reports outlining best practices for investigating and prosecuting terrorist financing for FATF member states, as well as an internal ISIS/Al Qaeda financing update and internal guidance designed “to assist investigative authorities trace financial flows between illicit arms traffickers and terrorists.” FATF also approved new guidance (to be published early March) intended to clarify and improve the adoption of risk-based supervision, which outlines ways supervisors should apply risk-based approaches to their activities, highlights common implementation challenges to risk-based supervision, and provides examples of effective strategies. Additionally, FAFT noted it has agreed to seek public consultation on amendments to its 2019 guidance concerning anti-money laundering/countering the financing of terrorism obligations concerning virtual assets and virtual asset service providers, and expects to release final updated guidance this summer. FATF also stated it intends to issue new guidance this summer on ways countries and the private sector can understand and mitigate proliferation financing threats, vulnerabilities, and risks.

    Financial Crimes FATF Agency Rule-Making & Guidance Combating the Financing of Terrorism Of Interest to Non-US Persons Anti-Money Laundering Virtual Currency

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  • Court rules CDC eviction moratorium unconstitutional

    Courts

    On February 25, the U.S. District Court for the Eastern District of Texas granted plaintiffs’ motion for summary judgment, ruling that decisions to enact eviction moratoriums rest with the states and that the federal government’s Article I power under the U.S. Constitution to regulate interstate commerce and enact necessary and proper laws to that end “does not include the power” to order all evictions be stopped during the Covid-19 pandemic. The Centers for Disease Control and Prevention (CDC) issued an eviction moratorium order last September (set to expire March 31), which “generally makes it a crime for a landlord or property owner to evict a ‘covered person’ from a residence” provided certain criteria are met. The CDC’s order grants the DOJ authority to initiate criminal proceedings and allows the imposition of fines up to $500,000. The plaintiffs—owners/managers of residential properties located in Texas—argued that the federal government does not have the authority under Article I to order property owners to not evict specified tenants, and that the decision as to whether an eviction moratorium should be enacted resides with the given state. The CDC countered that Article I afforded it the power to enact a nationwide moratorium, and argued, among other things, that “evictions covered by the CDC order may be rationally viewed as substantially affecting interstate commerce because 15% of changes in residence each year are between States.”

    However, the court disagreed stating that the CDC’s “statistic does not readily bear on the effects of the eviction moratorium” at issue, and that moreover, “[i]f statistics like that were enough, Congress could also justify national marriage and divorce laws, as similar incidental effects on interstate commerce exist in that field.” The court determined that the CDC’s eviction moratorium exceeds Congress’ powers under the Commerce Clause and the Necessary and Proper Clause. “The federal government cannot say that it has ever before invoked its power over interstate commerce to impose a residential eviction moratorium,” the court wrote. “It did not do so during the deadly Spanish Flu pandemic. . . .Nor did it invoke such a power during the exigencies of the Great Depression. [] The federal government has not claimed such a power at any point during our Nation’s history until last year.”

    The DOJ issued a statement on February 27 announcing its decision to appeal the court’s decision, citing that the court’s order “‘does not extend beyond the particular plaintiffs in that case, and it does not prohibit the application of the CDC’s eviction moratorium to other parties. For other landlords who rent to covered persons, the CDC’s eviction moratorium remains in effect.’”

    Courts Covid-19 CDC State Issues Constitution Evictions

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  • FFIEC updates BSA/AML examination manual

    Agency Rule-Making & Guidance

    On February 25, the FFIEC published updated versions of four sections of the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Manual), which provides examiners with instructions for assessing a bank’s or credit union’s BSA/AML compliance program and compliance with BSA regulatory requirements. The revisions can be identified by a 2021 date on the FFIEC BSA/AML InfoBase and include the following updated sections: Assessing Compliance with Bank Secrecy Act Regulatory Requirements, Customer Identification Program, Currency Transaction Reporting, and Transactions of Exempt Persons. The FFIEC notes that the “updates should not be interpreted as new instructions or as a new or increased focus on certain areas,” but are intended to “offer further transparency into the examination process and support risk-focused examination work.” In addition, the Manual itself does not establish requirements for financial institutions as these requirements are found in applicable statutes and regulations. (See also FDIC FIL-12-2021 and OCC Bulletin 2021-10.)

    Agency Rule-Making & Guidance FDIC Federal Reserve OCC FFIEC NCUA Bank Secrecy Act Anti-Money Laundering Of Interest to Non-US Persons Financial Crimes

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  • FDIC releases January enforcement actions

    Federal Issues

    On February 26, the FDIC released a list of administrative enforcement actions taken against banks and individuals in January. During the month, the FDIC issued 11 orders consisting of “two consent orders, two section 19 orders, two prohibition orders, two orders to pay civil money penalties, one order terminating consent order, and two orders terminating consent orders and orders for restitution.” Among the orders is a civil money penalty issued against a Tennessee-based bank related to alleged violations of the Flood Disaster Protection Act. Among other things, the FDIC claims that the bank (i) failed to provide required lender-placed flood insurance notices to borrowers about the availability of flood insurance under the National Flood Insurance Act; (ii) provided an incomplete lender-placed flood insurance notice to a borrower; (iii) allowed flood insurance to lapse during the terms of several loans without placing flood insurance on borrowers’ behalf; (iv) failed to maintain an adequate amount of flood insurance; and (v) failed to provide timely notice of special flood hazards and the availability of federal disaster relief assistance. The order requires the payment of a $4,000 civil money penalty.

    Federal Issues FDIC Enforcement Flood Insurance Flood Disaster Protection Act National Flood Insurance Act Mortgages

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  • FTC adds two additional defendants in suit regarding real estate investment scheme

    Federal Issues

    On February 25, the FTC and the Utah Division of Consumer Protection announced the addition of two additional defendants in an action taken against a Utah-based company and its affiliates (collectively, “defendants”) for allegedly using deceptive marketing to persuade consumers to attend real estate events costing thousands of dollars. As previously covered by InfoBytes, the FTC and the Utah Division of Consumer Protection claimed that the defendants violated the FTC Act, the Consumer Review Fairness Act (CRFA), and Utah state law by marketing real estate events with false claims and using celebrity endorsements. The defendants allegedly promised consumers they would (i) earn thousands of dollars in profits from real estate investment “flips” by using the defendants’ products; (ii) receive 100 percent funding for their real estate investments, regardless of credit history; and (iii) receive a full refund if they do not make “a minimum of three times” the price of the workshop within six months. In October 2019, the U.S. District Court for the District of Utah granted a temporary restraining order against the defendants, prohibiting the defendants from continuing to make unsupported marketing claims and from interfering with consumers’ ability to review their products.

    Federal Issues FTC Enforcement Courts State Regulators FTC Act UDAP Marketing Deceptive State Issues

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  • CFPB Section 1071 status report says rulemaking staff is evaluating recommendations

    Federal Issues

    On February 22, the CFPB filed its fourth status report in the U.S. District Court for the Northern District of California as required under a stipulated settlement reached in February with a group of plaintiffs, including the California Reinvestment Coalition. The settlement (covered by InfoBytes here) resolved a 2019 lawsuit that sought an order compelling the Bureau to issue a final rule implementing Section 1071 of the Dodd-Frank Act, which requires the Bureau to collect and disclose data on lending to women and minority-owned small businesses. 

    Among other things, the Bureau notes in the status report that it has satisfied the following required deadlines: (i) last September it released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration (InfoBytes coverage here); and (ii) it convened an SBREFA panel last October and released the panel’s final report last December (InfoBytes coverage here). The settlement next requires the parties to confer about a deadline for the Bureau to issue a Section 1071 notice of proposed rulemaking (NPRM). According to the status report, the Bureau’s rulemaking staff is in the process of evaluating the panel’s recommendations as well as stakeholder feedback, and has begun briefing new Bureau leadership “on the significant legal and policy issues that must be resolved to implement the Section 1071 regulations” and prepare the NPRM. The Bureau notes that the parties continue to discuss an appropriate deadline for issuing the NPRM, emphasizing that if the parties agree on a deadline, they “will jointly stipulate to the agreed date and request that the court enter that deadline.” As previously covered by InfoBytes, acting Director Dave Uejio stated recently that he has “pledged” the Bureau’s Division of Research, Markets, and Regulations “the support it needs to implement section 1071 of the Dodd-Frank Act without delay.”

    Find continuing Section 1071 coverage here.

    Federal Issues CFPB Courts Section 1071 Small Business Lending Dodd-Frank SBREFA

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  • FinCEN issues warning about fraud targeting Covid-19 economic impact payments

    Federal Issues

    On February 24, the Financial Crimes Enforcement Network (FinCEN) issued an advisory alerting financial institutions to potential fraud and other financial crimes targeting Covid-19 economic impact payments (EIP). The advisory is based on FinCEN’s analysis of Covid-19 related information obtained from Bank Secrecy Act data, public reporting, and law enforcement partners, and outlines potential methods of EIP fraud, associated red flags, and information for reporting suspicious activity related to such fraud. According to FinCEN, U.S. authorities have detected a wide range of EIP-related fraud, including (i) fraudulent, altered, or counterfeit checks; (ii) theft of EIPs; (iii) phishing schemes using EIPs as a lure, in which emails, letters, phone calls, and text messages are used by fraudsters in order to obtain personal information such as account numbers and passwords; and (iv) private companies with control over a person’s finances that seize a person’s EIP for wage garnishment or debt collection and do not return the inappropriately-seized payment.

    FinCEN also issued a notice for filing suspicious activity reports (SAR) related to Covid-19. The notice consolidates filing instructions and key terms for fraudulent activities, crimes, and cyber/ransomware attacks related to the pandemic. FinCEN reminded financial institutions to consult previously issued advisories and notices to access additional SAR filing instructions and other Covid-19-related advisories and alerts (available here).

    Federal Issues FinCEN Covid-19 Financial Crimes SARs CARES Act

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  • FHFA further extends foreclosure moratorium

    Federal Issues

    On February 25, the FHFA announced that Fannie Mae and Freddie Mac (GSEs) will extend their moratorium on single-family foreclosures and real estate owned (REO) evictions until June 30. The foreclosure moratorium applies only to homeowners with a GSE-backed, single-family mortgage, and the REO eviction moratorium applies only to properties that were acquired by the GSEs through foreclosure or deed-in-lieu of foreclosure transactions. Additionally, FHFA announced that borrowers may be eligible for up to a three-month forbearance extension so long as they are on a Covid-19 forbearance plan as of February 28 (details on the Covid-19 forbearance covered by InfoBytes here), and that the Covid-19 payment deferral may now cover up to 18 months of missed payments (previously covering up to 15 months of missed payments, additional details covered by InfoBytes here). The extensions are implemented in Fannie Mae Lender Letter LL-2021-07 and Freddie Mac Guide Bulletin 2021-8.

    Federal Issues FHFA Covid-19 Fannie Mae Freddie Mac GSE Forbearance Foreclosure Mortgages

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  • House discusses lending discrimination, proposed fair lending legislation

    Federal Issues

    On February 24, the House Financial Services Committee’s Subcommittee on Oversight and Investigations held a hearing entitled “How Invidious Discrimination Works and Hurts: An Examination of Lending Discrimination and Its Long-term Economic Impacts on Borrowers of Color.” The subcommittee’s memorandum regarding the hearing discussed the importance of exploring “available tools and potential legislative solutions to detect hidden discrimination and deter discrimination in lending and housing,” and addressed topics such as modern-day redlining, racial wealth gaps, and matched-pair testing (a method for detecting impermissible differences in treatment based on protected classes).

    Subcommittee members also discussed recently introduced H.R. 166, the “Fair Lending for All Act,” which would, among other things: (i) direct the CFPB to establish an Office of Fair Lending Testing charged with testing creditors’ ECOA compliance, and permit the Bureau to refer ECOA violations to the attorney general for appropriate action; (ii) extend the protected classes under the law to sexual orientation, gender identity, and an applicant’s location based on zip code or census tract; (iii) establish criminal penalties under ECOA for knowing and willful violations of prohibited credit discrimination, including personal liability for executive officers and directors; (iv) require the Bureau to review loan applications for compliance with ECOA and other federal consumer laws; and (v) amend HMDA Section 304(b)(4) to add the new prohibited credit discrimination categories.

    Federal Issues Federal Legislation Hearing House Financial Services Committee Fair Lending CFPB ECOA HMDA

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