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FinCEN Announces MOU with China Anti-Money Laundering Monitoring and Analysis Center
On December 11, FinCEN announced that Director Jennifer Shasky Calvery and the China Anti-Money Laundering Monitoring and Analysis Center (CAMLMAC) Director-General Luo Yang of the People’s Republic of China signed an MOU “to create a framework to facilitate expanded U.S.-China collaboration, communication, and cooperation between both nations’ financial intelligence units.” As the financial intelligence unit (FIU) for the United States, FinCEN is responsible for combating money laundering and the financing of terrorism by collecting, analyzing, and disseminating financial intelligence to law enforcement and other relevant authorities; as the Chinese counterpart to FinCEN, the CAMLMAC has comparable responsibilities to the Chinese government. The recently announced MOU is intended to provide a “mechanism for sharing information on money laundering and the financing of terrorism in order to prevent illicit actors from abusing either country’s financial systems.”
New York DFS Announces Enforcement Action Against Pakistan-Based Bank's New York Branch
On December 17, the New York DFS announced an enforcement action against a New York branch of a Pakistan-based bank. The Federal Reserve Bank of New York (FRBNY) and the DFS recently conducted an examination of the branch and found significant risk management and compliance failures with regard to state and federal laws, rules, and regulations relating to anti-money laundering (AML) compliance. Under the terms of the DFS’s order, the branch agreed to reform its policies and procedures to ensure compliance with AML laws. Per the order, the bank must submit to the DFS, within 60 days of the order, a number of written programs regarding its (i) corporate governance and management oversight; (ii) BSA/AML compliance review; (iii) customer due diligence; and (iv) suspicious activity monitoring and reporting. The branch must also hire an independent third-party approved by the DFS and the FRBNY to review the effectiveness of the bank’s compliance program, and to prepare a written report of its findings, conclusions, and recommendations for the program. Because the branch’s compliance with OFAC regulations was insufficient, the order also mandates that the bank retain an independent third-party to examine its U.S. dollar-clearing transactions between October 2014 and March 2015. Significantly, the order does not require the branch to pay a civil money penalty.
Former Executive Sentenced for Conspiracy to Bribe Panamanian Government Officials
On December 16, the U.S. District Court for the Northern District of California sentenced a former regional director of a Pennsylvania-based software and technology company for his involvement in a conspiracy to bribe Panamanian government officials to obtain technology contracts. U.S. District Judge Charles R. Breyer sentenced Vicente Eduardo Garcia to 22 months in prison for his role in the bribery scheme. In August 2015, Garcia pleaded guilty to conspiracy to violate the FCPA, admitting that in 2009 he and others conspired to bribe two Panamanian government officials directly and a third official through an agent in order to obtain a contract to provide a Panamanian state agency with a technology upgrade package. Garcia and his co-conspirators used sham contracts and false invoices to conceal the bribes, and Garcia personally received over $85,000 for arranging the bribes. Garcia previously settled with the SEC and agreed to pay disgorgement of $85,965 plus prejudgment interest.
Former Russian Government Official Sentenced For Nuclear Energy Conspiracy Involving FCPA Violations
On December 15, a former Russian government official, Vadim Mikerin, was sentenced to 48 months in prison for conspiracy to commit money laundering in connection with $2 million in bribe payments he accepted to award government contracts with a Russian state-owned nuclear energy corporation. U.S. District Judge Theodore D. Chuang of the District of Maryland also ordered Mikerin, who resides in Maryland, to forfeit $2.1 million. Between 2004 and October 2014, Mikerin received bribe payments intended to improperly influence him in his role as a key official at a subsidiary of a Russian state-owned nuclear energy corporation and to secure improper business advantages for U.S. companies that did business with the subsidiary. Mikerin admitted that, in connection with the FCPA violations, he conspired with others to transmit approximately $2,126,622 from the United States to shell company bank accounts in Cyprus, Latvia and Switzerland. Mikerin also admitted to using consulting agreements and code words to conceal the bribes. Two of Mikerin’s co-conspirators – Daren Condrey and Boris Rubizhevsky – also pleaded guilty to conspiracy charges and are awaiting sentencing.
CFPB Orders Small-Dollar Lender to Pay $10 Million for Debt Collection Practices; Releases Compliance Bulletin
On December 16, the CFPB announced a consent order against a Texas-based small-dollar lender for alleged violations of the Consumer Financial Protection Act, the Electronic Fund Transfer Act (EFTA), and the EFTA’s implementing regulation, Regulation E. According to the CFPB, beginning in July 2011, the company engaged in unfair or deceptive acts or practices and violated Regulation E by (i) visiting consumers’ homes and places of employment to collect debts; (ii) contacting third parties for reasons other than to acquire consumers’ location information, which put consumers at risk of their information being disclosed to third parties, and ignoring requests to stop calling consumers’ workplaces; (iv) making false threats of litigation if consumers did not pay the past due amount; (v) misrepresenting the company’s ability to, and routine practice to, run credit checks on loan applicants; (vi) requiring consumers to pay using pre-authorized electronic fund transfers; (vii) causing consumers to incur fees from their banks due to electronic withdrawal practices; and (viii) misrepresenting a consumer’s ability to repay loans early and to revoke authorization for electronic withdrawal authorization. The CFPB’s administratively-filed consent order requires the company to pay $7,500,000 towards refunding consumers affected by its practices, and pay a civil money penalty of $3,000,000. In addition, the order prohibits the company from collecting on defaulted loans owed by approximately 130,000 consumers, and from engaging in unfair and deceptive debt collection practices in the future.
The CFPB simultaneously released Compliance Bulletin 2015-07, warning creditors, debt buyers, and third-party collectors of potentially unlawful in-person debt collection practices. Specifically, the bulletin reminds the financial services industry of debt collection practices prohibited by the Dodd-Frank Act and the Fair Debt Collection Practices Act, including (i) engaging in unfair, deceptive, or abusive acts or practices; (ii) communicating with a consumer at any place or time that the debt collector knows, or should know, to be inconvenient to the consumer; (iii) communicating with persons other than the consumer (and other identified parties, except in certain circumstances) for purposes other than acquiring location information; (iv) “‘us[ing] unfair or unconscionable means to collect, or attempt to collect, debt’”; and (v) “‘engag[ing] in any conduct the consequences of which is to harass, oppress, or abuse a person in connection with collecting a debt.’”
FTC to Host Workshop Regarding Regulatory Environment of the U.S. Auto Distribution System
On December 14, the FTC announced that it will host a one-day workshop, Auto Distribution: Current Issues & Future Trends, to examine current issues and future trends related to the distribution of motor vehicles in the United States. Scheduled to take place on January 19, 2016 in Washington, D.C., the event’s primary focus will be to explore competition within the auto distribution system, including the effects of state regulations and emerging trends. The event will consist of presentations addressing the following four topic areas: (i) regulation of dealer location; (ii) laws relating to reimbursement for warranty services; (iii) restrictions on manufacturers’ ability to engage in direct sales to consumers; and (iv) new developments affecting auto distribution. The FTC announced an invitation for public comment on questions related to the workshop; the comment period will remain open through March 4, 2016.
OCC Releases Quarterly Mortgage Metrics Report Showing Continued Improvement through Third Quarter of 2015
On December 14, the OCC released its quarterly Mortgage Metrics Report. The report shows continued improvement of the mortgage performance of first-lien mortgages during the third quarter of 2015. 93.9% of mortgages included in the report were current and performing at the end of the quarter, compared to last year’s 93%. In addition, 30 to 59 days past due mortgages made up 2.3% of the portfolio, representing a 4.4% decrease from a year earlier, and 60 or more days past due mortgages made up 2.6%, representing a 16.1% decrease. The report also highlights a decline in both foreclosure activity and the need for other loss mitigation actions. The OCC’s report reflects performance data on first-lien residential mortgages serviced by eight national banks maintaining large mortgage-servicing portfolios.
FTC Announces Settlements with Alleged Mortgage Modification Scammers
On December 15, the FTC announced stipulated court orders banning four individuals from selling debt relief products and services. According to the FTC, the individuals “promised consumers help getting their mortgages modified, but instead stole their mortgage payments, leading some to foreclosure and bankruptcy.” The FTC’s April 2015 complaint states that the defendants targeted homeowners facing foreclosure and “engaged in a course of conduct to advertise, market, sell, provide, offer to provide, or arrange for others to provide [Mortgage Assistance Relief Services], including loan modifications.” The complaint further alleged that consumers never received modifications, lenders did not receive their trial payments, and consumers’ payments were never refunded. The court orders prohibit the individuals from engaging in the practices they respectively exploited, such as telemarketing, selling credit-related financial products and services, using aliases, and using material misrepresentations and unsubstantiated claims to sell financial products and services. Combined, the individuals will pay more than $6,250,000 in monetary judgments.
CFPB Releases Financial Well-Being Tool
On December 11, the CFPB released a tool designed to help measure a person’s financial well-being, defined in the agency’s January report as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow them to enjoy life.” The tool consists of a set of questions and a scoring worksheet, as well as abbreviated versions of both. Financial educators are encouraged to use the tool to quantify a consumer’s financial well-being on a scale that considers the person’s present and future financial security and financial freedom of choice. The scale is designed to help financial educators (i) assess a person’s financial well-being at the beginning of the consultation; (ii) track a person’s financial progress over time; (ii) gauge how effective a program is in improving consumers’ financial well-being; and (iv) analyze the relationship between financial well-being and other factors in financial survey research.
Ninth Circuit: TILA Amendment Not Retroactive
On December 14, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s ruling that a 2009 amendment to TILA, which requires creditors to provide borrowers with written notice of the sale or transfer of mortgages, does not apply retroactively. Talaie v. Wells Fargo Bank, No. 13-56314 (9th Cir. Dec. 14, 2015). In the putative class action case, plaintiffs alleged that one of the defendants transferred the deed of trust to the other defendant without providing notice to the borrowers, three years prior to the passage of the TILA amendment. Citing to Supreme Court precedent, the court reasoned that the presumption against retroactive legislation is “deeply rooted in our jurisprudence,” which can only be overcome by a clear and unambiguous Congressional intent. Id (citing Landgraf v. USI Film Prods., 511 U.S. 244, 265 (1994)). Applying Landgraf, the Ninth Circuit held that retroactive application here would (i) impair defendants’ rights at the time when they acted because they could do so without providing notice to the borrowers; (ii) increase the defendants’ “liability for past conduct”; and (iii) impose “new duties” on transactions already completed. The Ninth Circuit further concluded that Congress did not demonstrate a clear or unambiguous intention for the 2009 amendment to be given retroactive effect.