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FinCEN's Associate Director for Enforcement Delivers Remarks at BSA Conference
On June 18, FinCEN’s Associate Director for Enforcement, Stephanie Brooker, delivered remarks at the Bank Secrecy Act Conference, focusing on three main areas: (i) BSA filing trends, the value of BSA data, and compliance development in the casino industry over the past year; (ii) FinCEN’s enforcement approach and recent enforcement developments; and (iii) the significance of establishing and maintaining a culture of compliance throughout the business and compliance sides of casinos and card clubs. In addition, Brooker noted certain principles at the core of FinCEN’s enforcement program: (i) transparency in the agency’s rationale behind its enforcement actions; (ii) accountability, ensuring that financial institutions, and any individual related to the financial institution, take responsibility for violations of the BSA; and (iii) giving credit where credit is due by considering an institution’s “documented improvements in AML compliance over time.” Finally, Brooker stressed that in order for a financial institution to successfully maintain a culture of compliance, its business side and business leaders must take AML controls and BSA compliance seriously, meaning that “every casino employee, from the top down, views AML compliance as part of his or her responsibility.”
FCC Adopts Chairman Wheeler's Proposal to Strengthen Consumer Protection Under the TCPA
On June 18, the FCC held an Open Commission Meeting, during which the Commission adopted Chairman Wheeler’s proposal to strengthen consumer protection under the TCPA. The set of declaratory rulings included in the proposal affirms consumers’ rights to revoke their consent to receive robocalls or robotexts at any reasonable time an in any reasonable way, and gives carriers the ability to provide consumers with “Do Not Disturb” technology. The Commission’s June 18 Action by Declaratory Ruling and Order was described as an effort to close “loopholes and [strengthens] consumer protections already on the books.”
New York AG Announces Nearly $14 Million Agreement with Local Auto Dealers Over Deceptive Sales Practices, Plans to Sue an Additional 11 Auto Dealerships
On June 17, New York Attorney General Eric Schneiderman announced an approximate $14 million agreement with three jointly-owned auto dealers in connection with the alleged unlawful sale of add-on products, such as credit repair and identity-theft prevention services. According to the AG, the auto dealers failed to disclose the costs and fees of many “after-sale” items to consumers, in some instances resulting in the addition of $2,000 to the purchase or leasing price of a vehicle. Furthermore, the AG contends that the dealers concealed that they were charging consumers for the add-on services, or misrepresented that the services were free of charge. Under the terms of the settlement agreement, the auto dealers must, among other things, (i) pay more than $13.5 million in restitution to affected consumers and (ii) pay $325,000 in penalties, fees, and costs to New York State. In addition to the settlement announcement, AG Schneiderman made public that his office has served notices of intent to file suits against an additional eleven dealerships for allegedly engaging in similar practices.
Nevada Assembly Passes Legislation Relating to Mortgage Lending and Servicing Regulation, Licensing and Fees
On June 9, Governor Brian Sandoval (R-NV) signed into law AB 480, which revises existing law concerning the licensing and regulation of escrow agents and escrow agencies. The law also authorizes a wholesale lender from outside the state to operate in Nevada as a mortgage broker or mortgage banker, and increase fees related to those roles. Further, the bill requires the Commissioner of Mortgage Lending to prescribe by regulation the requirements for licensing, regulation and discipline of mortgage servicers. Specific sections of the bill – 101.3, 101.7, and 103 – are effective immediately, while others become effective January 1, 2016.
District Court Rejects Lender's Motion to Dismiss in Ongoing Litigation with CFPB
On June 12, the United States District Court for the Eastern District of California denied Castle & Cooke Mortgage’s motion to dismiss in a putative class action brought by affected borrowers stemming from Castle and Cooke’s 2013 settlement with the CFPB. The underlying complaint is based on the allegation that the “loan officer who sold plaintiff his mortgage loan was paid a bonus that was based, at least in part, on the fact that plaintiff received a more expensive and/or less favorable loan than he otherwise would have received.” The complaint seeks various remedies, including actual and statutory damages under the Truth in Lending Act. The complaint contains four separate causes of action: (i) violations of TILA, (ii) violations of the Utah Residential Mortgage Practices and Licensing Act, (iii) unjust enrichment under Utah law, and (iv) violations of the California Unfair Competition Law. Castle & Cooke only moved to dismiss the final two claims. In denying Castle & Cooke’s motion to dismiss, the court found that both challenged claims could be pursued, rejecting Castle & Cooke’s arguments that the claims were inappropriate given the remedies available under TILA. With this denial, the plaintiffs will be able to continue pursuing all four causes of action as the litigation continues.
FIFA Investigation Updates: Plea Agreement with American FIFA Official Unsealed
On June 15, the U.S. District Court for the Southern District of New York unsealed a 2013 plea agreement under which American FIFA Executive Committee Member Chuck Blazer secretly pleaded guilty to ten charges related to corruption in the soccer organization. Mr. Blazer agreed to forfeit more than $1.9 million, and to pay back-taxes and penalties on more than $11 million in unreported income.
According to the plea agreement, Mr. Blazer began cooperating with the DOJ’s investigation in December of 2011, even agreeing to work undercover making secret recordings. The unsealing of the plea agreement is the latest development in the ongoing fallout from the racketeering, wire fraud, and money laundering indictments announced three weeks ago by the DOJ against soccer executives at FIFA and others tied to the organization. Mr. Blazer’s testimony at his plea hearing in November 2013 was unsealed two weeks ago.
DOJ Reaches Agreement with Government Contracting Company and Former VP over Alleged Bribery
On June 16, the DOJ entered into a non-prosecution agreement with a Florida-based defense and government contracting company to resolve allegations that it conspired to bribe Kuwaiti officials for the purpose of securing a government contract. In connection with his alleged involvement in the bribery scheme, the company’s former vice president (VP) also pleaded guilty to one count of conspiracy to violate anti-bribery provisions of the Foreign Corrupt Practices Act (FCPA). In 2004, Kuwait’s Ministry of the Interior initiated the Kuwait Security Program, a homeland security project intended to “provide nationwide surveillance for several Kuwaiti government agencies, primarily through the use of closed-circuit television cameras.” The program was divided into two phases: (i) the planning and feasibility period; and (ii) the installment of equipment, methods, and programs suggested during the first phase. According to the non-prosecution agreement, the company and its former VP schemed to ensure that the company won both the Phase I and II contracts. Specifically, the company, its former VP, and other senior employees established a shell company to bid on Phase I, giving the company an advantage in the Phase II bidding, which contained the more lucrative revenues. The shell company secured the Phase I contract for approximately $4 million, and half of those funds were allegedly diverted to a consultant who bribed Kuwaiti officials to assist the government contracting company in obtaining the Phase II contract. Admitting to the DOJ Criminal Division’s charges and cooperating with the federal investigation, the company has agreed to (i) pay a $7.1 million penalty; (ii) conduct a review of its current internal controls, policies, and procedures, and make any necessary changes to ensure that its record keeping and anti-corruption compliance program are sufficient; and (iii) report annually to the Criminal Division and the U.S. Attorney’s Office of the Eastern District of Virginia on the remediation and implementation of its compliance program and internal controls, policies, and procedures.
OCC to Escheat Funds from Foreclosure Review; Agency Terminates Three Consent Orders and Issues Six Amended Orders
On June 17, the OCC announced that, at year-end 2015, it will escheat any remaining uncashed payments made pursuant to the Independent Foreclosure Review Payment Agreement. Despite the IFR Payment Agreement having already resulted in the distribution of over $2.7 billion to more than 3.2 million eligible borrowers, the OCC anticipates that roughly $280 million from OCC-supervised institutions will remain unclaimed by the end of 2015. By escheating the remaining available funds, eligible borrowers and their heirs will have the opportunity to claim the funds. The agency also announced that it terminated foreclosure-related consent orders against three financial institutions because they have complied with the April 2011 orders and the February 2013 amendments to the orders. In addition, the OCC issued amended consent orders to six banks that did not meet all of the requirements of the consent orders by placing restrictions on the following business activities: (i) acquisition of residential mortgage servicing or residential mortgage servicing rights; (ii) new contracts to perform residential mortgage servicing for other parties; (iii) outsourcing or sub-servicing of new residential mortgage servicing activities to other parties; (iv) off-shoring new residential mortgage servicing activities; and (v) new appointments of senior officers in charge of residential mortgage servicing or residential mortgage servicing risk management and compliance. The limitations placed on the financial institutions were based on each bank’s particular circumstances.
Special Alert: CFPB Will Propose to Delay TRID Rule Until October 1
Two weeks after declining requests from industry and members of Congress for delayed enforcement of the TILA-RESPA Integrated Disclosure (“TRID”) rule, the CFPB announced today that it will be issuing a proposed amendment to delay the rule’s effective date from August 1 to October 1, 2015. CFPB Director Richard Cordray stated:
We made this decision to correct an administrative error that we just discovered in meeting the requirements under federal law, which would have delayed the effective date of the rule by two weeks. We further believe that the additional time included in the proposed effective date would better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year at that time.
The announcement further stated that “[t]he public will have an opportunity to comment on this proposal and a final decision is expected shortly thereafter.”
For additional information and resources on the TRID rule, please visit our TRID Resource Center.
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- Clinton R. Rockwell, (310) 424-3901
- Jeffrey P. Naimon, (202) 349-8030
- John P. Kromer, (202) 349-8040
- Joseph M. Kolar, (202) 349-8020
- Jeremiah S. Buckley, (202) 349-8010
- Melissa Klimkiewicz, (202) 349-8098
FinCEN Announces Civil Money Penalty Against West Virginia Bank for BSA Violations
On June 15, FinCEN announced a $4.5 million civil money penalty against a West Virginia-based bank for alleged violations of the BSA from 2008 through 2013. According to the Assessment of Civil Money Penalty, the bank failed to monitor, detect, and report suspicious activity as a result of an inadequate AML and customer due diligence program, ultimately allowing over $9.2 million in structured and otherwise suspicious cash transactions to pass though the financial institution unreported. FinCEN found that the bank failed to establish and maintain an AML program that provided, at a minimum: (i) a system of internal controls to ensure ongoing compliance; (ii) a designated individual or individuals responsible for coordinating and monitoring day-to-day compliance; (iii) independent testing for compliance to be conducted by either an outside party or bank personnel; and (iv) training for appropriate personnel. FinCEN’s enforcement action and $4.5 million civil money penalty against the bank is concurrent with a $3.5 million penalty imposed by the FDIC, of which $2.2 million is concurrent with a forfeiture pursuant to a deferred prosecution agreement with the U.S. Attorney’s Office for the Southern District of West Virginia.