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  • CFTC speech highlights new executives, dataset use, and AI Task Force

    Privacy, Cyber Risk & Data Security

    On November 16, the Chairman of the CFTC, Rostin Behnam, delivered a speech during the 2023 U.S. Treasury Market Conference held in New York where he showcased the CFTC’s plans to better use data and roll out an internal AI task force. One of the CFTC’s initiatives comes with the hiring of two new executive-level roles: a Chief Data Officer and a Chief Data Scientist. These executives will manage how the CFTC uses AI tools, and oversee current processes, including understanding large datasets, cleaning the datasets, identifying and monitoring pockets of stress, and combating spoofing.

    The CFTC also unveiled its plans to create an AI Task Force and to “gather[] information about the current and potential uses of AI by our registered entities, registrants, and market participants in areas such as trading, risk management, and cybersecurity.” The Commission plans to obtain feedback for the AI Task Force through a formal Request for Comment process in 2024. The CFTC hopes these comments will help the agency create a rulemaking policy on “safety and security, mitigation of bias, and customer protection.”

    Privacy, Cyber Risk & Data Security CFTC Big Data Artificial Intelligence Spoofing

  • FTC says robocall violations top consumers’ do-not-call complaints

    Federal Issues

    On January 5, the FTC issued its National Do Not Call (DNC) Registry biennial report to Congress. According to the report, more than 244 million consumers have now placed their telephone numbers on the DNC Registry over the past two years. The report also highlighted that in FY 2021, the Commission received more than five million DNC complaints, the majority of which reported robocalls violations as opposed to live telemarketing. The FTC reported that the increased number of illegal telemarketing calls correlates with advancements in technology that make it easier for telemarketers to “spoof” the caller ID information accompanying a call. “[M]any telemarketers use automated dialing technology to make calls that deliver prerecorded messages (commonly referred to as ‘robocalls’), which allow violators to make very high volumes of illegal calls without significant expense,” the FTC said. Imposters posing as government representatives or legitimate business entities topped the complaint list, followed by calls related to warranties and protection plans, debt-reduction offers, and medical and prescription issues. Last month, in response to the consistently high level of impersonator scam complaints, the FTC issued an advanced notice of proposed rulemaking seeking comments on a wide-range of questions related to government and business impersonation fraud (covered by InfoBytes here). The FTC noted that these scammers are looking for information that can be used to commit identity theft or seek monetary payment and often request that funds be paid through wire transfer, gift cards, or cryptocurrency. Additionally, the FTC stated that since the beginning of the Covid-19 pandemic, it has received more than 18,000 Covid-related DNC complaints.

    Federal Issues FTC Robocalls Spoofing Covid-19 Consumer Protection Do Not Call Registry

  • Bank settles spoofing charges with CFTC, SEC, and DOJ for nearly $1 billion

    Federal Issues

    On September 29, a global bank and several of its subsidiaries agreed to resolve investigations into allegations that their traders engaged in manipulative trading of metals futures and U.S. Treasury securities using a practice known as spoofing. The CFTC’s order settled charges that numerous bank traders violated federal commodities laws over a period of at least eight years by allegedly placing hundreds of thousands of spoof orders in precious metals and Treasury futures contracts. According to the CFTC announcement, a broker-dealer subsidiary of the bank—a registered futures commission merchant—also allegedly failed to identify, investigate, and stop the misconduct, despite numerous red flags. While neither admitting nor denying any wrongdoing in connection with the CFTC’s allegations, “except to the extent that Respondents admit those findings in any related action against Respondents by, or any agreement with, the [DOJ] or any other governmental agency or office,” the bank and its subsidiaries have agreed to pay a $920 million penalty.

    In a parallel matter, the SEC announced the same day that it had reached a settlement with the broker-dealer subsidiary for fraudulently engaging in manipulative trading of Treasury securities. The SEC alleged that the subsidiary traders place non-bona fide orders to buy or sell a particular Treasury security in order “to create a false appearance of buy or sell interest” to “induce other market participants to trade against the bona fide orders at prices that were more favorable to [the broker-dealer subsidiary] than [the broker-dealer subsidiary] otherwise would have been able to obtain.” The broker-dealer subsidiary agreed to the entry of the SEC’s cease-and-desist order, in which it admitted to the SEC’s factual findings and agreed to pay disgorgement of $10 million and a civil penalty of $25 million, which will be offset by amounts paid by the bank and its subsidiaries in parallel DOJ and CFTC actions.

    Additionally, the DOJ announced it had entered into a three-year deferred prosecution agreement with the bank to resolve criminal charges of two counts of wire fraud related to the aforementioned allegations. The agreement imposes a payment of more than $920 million, which consists of a criminal monetary penalty, criminal disgorgement, and victim compensation, with the criminal penalty credited towards the equal amount in penalties imposed by the CFTC. The bank and its subsidiaries must also continue to cooperate with any ongoing or future investigations and prosecutions, and it must report evidence or allegations of misconduct that could further violate federal anti-fraud, securities, or commodities statutes. Furthermore, the bank and its subsidiaries are required to enhance internal compliance programs as appropriate.

    Federal Issues DOJ SEC CFTC Spoofing Enforcement

  • New York AG takes action against debt collection operation

    State Issues

    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.

    State Issues State Attorney General Debt Collection Spoofing FDCPA

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