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  • OFAC sanctions Belarusian state-owned enterprises and government officials; amends Belarus Sanctions Regulations

    Financial Crimes

    On March 24, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Belarusian state-owned enterprises and government officials. In so doing, OFAC designated three entities and nine individuals, and identified one presidential aircraft as blocked property, pursuant to Executive Order 14038. The announcement noted that the designations build on previously issued sanctions taken against individuals and entities in Belarus in response to efforts by the Lukashenka regime to suppress democracy and support the Russian Federation’s war against Ukraine. “The authoritarian Lukashenka regime relies on state-owned enterprises and key officials to generate substantial revenue that enables oppressive acts against the Belarusian people,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian Nelson said in the announcement. Concurrently, the State Department imposed visa restrictions on 14 additional individuals, “including regime officials involved in policies to threaten and intimidate the Belarusian people, for their involvement in undermining democracy under Presidential Proclamation 8015.”

    As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or if otherwise exempt.

    Additionally, OFAC published a final rule in the Federal Register amending and reissuing the Belarus Sanctions Regulations in their entirety in order to implement the August 2021 Belarus-related Executive Order 14038 (discussed above), “Blocking Property of Additional Persons Contributing to the Situation in Belarus,” and incorporate a directive regarding sovereign debt (covered by InfoBytes here and here). The final rule (effective March 27) also updates and adds new definitions, general licenses, and interpretive guidance, among other things.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Sanctions OFAC Designations Belarus Russia Ukraine Ukraine Invasion

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  • OFAC sanctions additional persons connected to Burma’s military regime

    Financial Crimes

    On March 24, pursuant to Executive Order 14014, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against two individuals and six entities connected to Burma’s military regime. In announcing the sanctions, OFAC explained that the Burmese military, which overthrew the country’s democratic government in February 2021, has increased its reliance on air strikes in civilian populated areas and that the designated persons have provided assistance to military efforts through the importation, storage, and distribution of jet fuel. “Burma’s military regime continues to inflict pain and suffering on its own people,” Under Secretary of the Treasury for Terrorism and Financial Intelligence Brian E. Nelson said in the announcement. “The United States remains steadfast in its commitment to the people of Burma, and will continue to deny the military the materiel it uses to commit these atrocities.”

    In conjunction with the sanctions, OFAC published an alert warning of the sanctions risks associated with providing jet fuel to the Burmese military. As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or if otherwise exempt.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Burma SDN List

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  • FinCEN releases beneficial ownership reporting guidance

    Financial Crimes

    On March 24, FinCEN released its first set of guidance materials to aid the public and small businesses in reporting beneficial ownership information (i.e., individuals who directly or indirectly own or control a company). As previously covered by InfoBytes, last September, FinCEN published a final rule establishing beneficial ownership information requirements, as required by the Corporate Transparency Act. The final rule, which becomes effective January 1, 2024, will require most corporations, limited liability companies, and other entities created in or registered to do business in the United States, to report information about their beneficial owners to FinCEN. Reporting companies created or registered before January 1, 2024, will have until January 1, 2025, to file their initial reports, while reporting companies created or registered after January 1, 2024, will have 30 days after creation or registration to file their initial reports. The guidance materials include FAQs, information on key filing dates, and informational videos. Additional guidance will be published in the coming months, including a Small Entity Compliance Guide, FinCEN said in the announcement.

    Financial Crimes Agency Rule-Making & Guidance Of Interest to Non-US Persons FinCEN Beneficial Ownership Corporate Transparency Act

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  • OCC reaches $17 million settlement with former executive over account openings

    On March 15, the OCC announced a $17 million civil money penalty and prohibition order against a former senior executive who served as head of a national bank’s community banking division for her role in the bank’s incentive compensation sales practices. As previously covered by InfoBytes, in January 2020, the OCC announced charges against the former general counsel and other executives, seeking a lifetime prohibition from participating in the banking industry, a personal cease and desist order, and/or civil money penalties. The 2020 announcement included settlements with three of the executives. The OCC settled with three others in September 2020, as well as with the bank’s former general counsel in January 2021 (covered by InfoBytes here and here). In addition to the $17 million penalty, the former senior executive entered a plea agreement admitting to one count of obstructing a bank examination.

    Bank Regulatory Federal Issues OCC Enforcement Incentive Compensation

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  • FHFA seeks feedback on implementation of updated credit score requirements

    Agency Rule-Making & Guidance

    On March 23, FHFA announced a two-phase plan for soliciting stakeholder input on the agency’s proposed process for implementing updated credit score requirements. In October, FHFA announced that the FICO credit score model would be replaced by the FICO 10T and the VantageScore 4.0 credit score models, which were both validated and approved for use by Fannie Mae and Freddie Mac (covered by InfoBytes here). The agency also announced that Fannie and Freddie will now require two credit reports – instead of three – from the national consumer reporting agencies for single-family loan acquisitions. FHFA seeks public input on the projected implementation process to inform the transition to these new credit score models, which the agency estimates will happen in two phases. Phase one, estimated to start Q3 2024, will include the delivery and disclosure of additional credit scores, while phase two will include the incorporation of the new credit score models in pricing, capital, and other processes (estimated to occur in Q4 2025).

    Agency Rule-Making & Guidance Federal Issues FHFA Credit Scores Consumer Finance Freddie Mac Fannie Mae

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  • FHA reminds servicers of available HAF financial assistance

    Federal Issues

    On March 24, FHA reminded servicers about their obligation to inform distressed homeowners about the availability of financial assistance for FHA-insured mortgages, including single-family forward mortgages and home equity conversion mortgages (HECM), through the Homeowner Assistance Fund (HAF). HAF was established in 2021 to provide financial support to eligible homeowners who suffered financial hardship during Covid-19. HAF funds may be used to bring a mortgage current or be used in combination with certain available FHA-loss mitigation options for single family forward mortgages or with the Covid-19 HECM Property Charge Repayment Plan. HAF funds also may be used to reduce the balance or pay off a borrower’s outstanding loss mitigation partial claim, even if a borrower’s mortgage payments are now current. Additionally, as permitted, HAF funds may be used to pay for delinquent property tax and homeowners insurance charges on defaulted HECMs. FHA noted in its announcement that the definition of “imminent default” also has been expanded to include homeowners who qualify for HAF. Consequently, “servicers will be able to offer additional loss mitigation options to borrowers who qualified for or used HAF funds and may no longer technically be delinquent but require further assistance to avoid redefault,” FHA explained.

    Federal Issues FHA Mortgages Consumer Finance Loss Mitigation Covid-19

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  • FTC finalizes gaming company order on dark patterns

    Federal Issues

    On March 14, the FTC finalized an administrative order requiring a video game developer to pay $245 million in refunds to consumers allegedly tricked into making unwanted in-game purchases. As previously covered by InfoBytes, the FTC filed an administrative complaint claiming players were able to accumulate unauthorized charges without parental or card holder action or consent. The FTC alleged that the company used a variety of dark patterns, such as “counterintuitive, inconsistent, and confusing button configuration[s],” designed to get players of all ages to make unintended in-game purchases. These tactics caused players to pay hundreds of millions of dollars in unauthorized charges, the FTC said, adding that the company also charged account holders for purchases without authorization. Under the terms of the final decision and order, the company is required to pay $245 million in refunds to affected card holders. The company is also prohibited from charging players using dark patterns or without obtaining their affirmative consent. Additionally, the company is barred from blocking players from accessing their accounts should they dispute unauthorized charges.

    Separately, last month the U.S. District Court for the Eastern District of North Carolina entered a stipulated order against the company related to alleged violations of the Children’s Online Privacy Protection Act (COPPA). The FTC claimed the company failed to protect underage players’ privacy and collected personal information without first notifying parents or obtaining parents’ verifiable consent. Under the terms of the order, the company is required to ensure parents receive direct notice of its practices with regard to the collection, use or disclosure of players’ personal information, and must delete information previously collected in violation of COPPA’s parental notice and consent requirements unless it obtains parental consent to retain such data or the player claims to be 13 or older through a neutral age gate. Additionally, the company is required to implement a comprehensive privacy program to address the identified violations, maintain default privacy settings, obtain regular, independent audits, and pay a $275 million civil penalty (the largest amount ever imposed for a COPPA violation).

    Federal Issues FTC Enforcement Dark Patterns COPPA Privacy, Cyber Risk & Data Security FTC Act Unfair UDAP Consumer Finance

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  • FTC examines small business credit reporting

    Federal Issues

    On March 16, the FTC launched an inquiry into the small business credit reporting industry, seeking information from firms on how information is collected and processed for business credit reports, how these reports are marketed, and firms’ approaches for addressing factual errors contained in the reports. Firms are also asked to provide information on the types of services provided to businesses for monitoring or enhancing their own credit reports. The FTC noted that currently there is no federal law that specifically outlines credit reporting processes and protections for small businesses, unlike individual consumer credit reports, which are governed by the FCRA.

    Federal Issues FTC Small Business Credit Report FCRA Credit Reporting Agency

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  • FTC asks how cloud computing affects competition and data security

    Federal Issues

    On March 22, the FTC announced it is seeking information on cloud computing providers’ business practices with respect to the potential impact on competition and data security. FTC staff noted that the agency is also interested in how cloud computing is impacting specific industries, including healthcare, finance, transportation, e-commerce, and defense. The request for information (RFI) solicits feedback on a range of issues, including (i) market power and competition (e.g. do particular segments of the economy have to rely on a small handful of cloud service providers); (ii) contract negotiation flexibility; (iii) incentives given to customers to ensure they obtain more of their cloud services from a single provider; (iv) security risks (e.g. what are the data security implications if particular segments of the economy rely on a small number of cloud service providers, and are these providers competing on their ability to provide secure storage for customer data); (v) products or services tied to artificial intelligence; and (vi) how cloud providers identify and notify customers of security risks related to security design, implementation, or configuration. Comments on the RFI are due May 22.

    Federal Issues FTC Cloud Computing Privacy, Cyber Risk & Data Security Competition

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  • Biden administration questions crypto assets

    Federal Issues

    President Biden recently issued his sweeping economic report, in which the administration’s Council of Economic Advisers addressed numerous economic policy concerns, including the current crypto ecosystem and the perceived appeal of crypto assets. The report discussed claims made about the purported benefits of crypto assets, such as the decentralized custody and control of money, as well as the potential for “improving payment systems, increasing financial inclusion, and creating mechanisms for the distribution of intellectual property and financial value that bypass intermediaries that extract value from both the provider and recipient,” but argued that “[s]o far, crypto assets have brought none of these benefits.” The report countered that, in fact, “crypto assets to date do not appear to offer investments with any fundamental value, nor do they act as an effective alternative to fiat money, improve financial inclusion, or make payments more efficient; instead, their innovation has been mostly about creating artificial scarcity in order to support crypto assets’ prices—and many of them have no fundamental value.”

    Arguing that these issues raise questions about the role of regulations in protecting consumers, investors, and the financial system on a whole, the report conceded that some of the potential benefits of crypto assets —including (i) serving as investment vehicles; (ii) offering money-like functions without having to rely on a single authority; (iii) enabling fast digital payments; (iv) improving the underbanked population’s access to financial services; and (v) improving the current financial technology infrastructure through distributed ledger technology—may be realized down the road.  However, the report cautioned that “[m]any prominent technologists have noted that distributed ledgers are either not particularly novel or useful or they are being used in applications where existing alternatives are far superior.” Highlighting the risks and costs of crypto assets, the report asserted, among other things, that cryptocurrencies are not as effective as a medium of exchange and do not serve “as an effective alternative to the U.S. dollar” due to their use as both money and an investment vehicle.

    Federal Issues Digital Assets Biden Cryptocurrency Fintech

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