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Financial Services Law Insights and Observations


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  • FinCEN penalizes first bitcoin “mixer” $60 million for violating BSA

    Federal Issues

    On October 19, the Financial Crimes Enforcement Network (FinCEN) announced a civil money penalty against an individual exchanger who founded and operated two convertible virtual currency (CVC) platforms known as “mixers” or “tumblers” for allegedly violating the Bank Secrecy Act’s (BSA) registration, program, and reporting requirements. According to FinCEN, the exchanger, among other things, (i) accepted and transmitted CVC through a variety of means, which “contain[ed] the proceeds of various acts of cybercrime”; (ii) conducted over 1,225,000 transactions for customers; and (iii) “is associated with virtual currency wallet addresses that have sent or received over $311 million.” FinCEN also contends that the exchanger advertised his services to customers on the dark web and circumvented BSA’s requirements by disregarding his obligations and operating the platforms as unregistered money service businesses (MSB).

    Under FinCEN’s 2013 guidance and 2019 clarification, exchangers and administrators of CVC are money transmitters and therefore subject to BSA regulations, with mixers and tumblers subject to the same rules. (Previously covered by InfoBytes here and here.) According to FinCEN, the exchanger’s activities qualified him as a virtual currency exchanger, MSB, and a financial institution under the BSA. As such, the exchanger was required to register as an MSB with FinCEN, establish and implement an effective written anti-money laundering program, detect and file suspicious activity reports, and report currency transactions, which he failed to do. The order requires the exchanger to pay a $60 million civil money penalty.

    Federal Issues FinCEN Enforcement Anti-Money Laundering Virtual Currency Bank Secrecy Act

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  • FHFA extends Covid-19 flexibilities until November 30

    Federal Issues

    On October 19, the FHFA announced the extension of several loan origination guidelines put in place to assist borrowers during the Covid-19 pandemic. Specifically, FHFA extended until November 30 existing guidelines related to: (i) alternative appraisal requirements on purchase and rate term refinance loans; (ii) alternative methods for documenting income and verifying employment before loan closing; and (iii) expanding the use of power of attorney to assist with loan closings. The extensions are implemented in updates to Fannie Mae Lender Letters LL-2020-03, LL 2020-04, and Freddie Mac Guide Bulletin 2020-37.

    Federal Issues FHFA Mortgages Fannie Mae Freddie Mac GSE

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  • FDIC encourages investment in MDIs and CDFIs

    Federal Issues

    On October 16, the FDIC published a resource guide titled, “Investing in the Future of Mission-Driven Banks,” which promotes private and philanthropic investment partnerships with FDIC-insured Minority Depository Institutions (MDIs) and Community Development Financial Institution banks (CDFI banks). According to the guide, there are nearly 250 MDIs and CDFI banks insured by the FDIC, which provide services to “minority, low- or moderate-income (LMI), and rural communities at higher rates than mainstream banks,” and have combined capital of less than $40 billion. The resource guide notes that equity capital investments increase banks’ lending by “multiple[s] of the original investment,” and in some instances, between eight and ten times the original investment. Lastly, certain investments may also qualify for matching funds in existing support programs, and partnerships between banks, private companies, and philanthropic organizations can expand the support. 

    Federal Issues FDIC CDFI Minority Depository Institution

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  • FTC temporarily halts unlawful debt collection operation

    Federal Issues

    On October 15, the FTC announced that the U.S. District Court for the Northern District of Georgia granted a temporary restraining order against a debt collection operation for allegedly engaging in fraudulent debt collection practices. According to the FTC’s complaint, the operation violated the FTC Act and the FDCPA by, among other things, (i) posing as law enforcement officers, prosecutors, attorneys, mediators, investigators, or process servers when calling consumers to collect debts; (ii) using profane language and threatening consumers with arrest or serious legal consequences if debts were not immediately paid; (iii) threatening to garnish wages, suspend Social Security payments, revoke drivers’ licenses, or lower credit scores; (iv) attempting to collect debts that were either never owed or were no longer owed; (v) unlawfully contacting third parties, such as family members or employers; and (vi) adding unauthorized or impermissible charges or fees to consumers’ debts. The complaint asserts that the operation also refused to provide written verification about the alleged debts as required by the FDCPA. Beyond the temporary restraining order, the FTC is seeking a permanent injunction, contract rescission or reformation, restitution, disgorgement, the appointment of a receiver, immediate access to business premises, an asset freeze, and other equitable relief.

    The action is part of the FTC’s “Operation Corrupt Collector”—a nationwide enforcement and outreach effort established last month by the FTC, CFPB, and more than 50 federal and state law enforcement partners to address illegal debt collection practices. (Covered by InfoBytes here.)

    Federal Issues FTC Debt Collection Enforcement FTC Act FDCPA

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  • FSB releases LIBOR transition roadmap

    Federal Issues

    On October 16, the Financial Stability Board released a “Global Transition Roadmap for LIBOR,” which details the steps financial firms and their clients should take “in order to ensure a smooth LIBOR transition” from now through 2021. In addition to identifying actions that should already be complete, the roadmap details the following steps:

    • ISDA Fallbacks Protocol Effective Date. Firms should adhere to the International Swaps and Derivatives Association’s (ISDA) IBOR Fallback Protocol and IBOR Fallback Supplement, which will be launched on October 23 and take effect on January 25, 2021 (covered by InfoBytes here).
    • By the end of 2020. Lenders should be able to offer non-LIBOR products to customers.
    • By mid-2021. Firms should have identified which contracts can be amended and make contact with other parties to prepare for the use of alternative rates. Firms should execute formalized plans to covert legacy LIBOR contracts to alternative rates. 
    • By the end of 2021. All new business should be conducted in, or capable of switching immediately to, alternative rates.

    For continuing InfoBytes coverage on the LIBOR transition see here.

    Federal Issues LIBOR Financial Stability Board

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  • FHFA extends policy allowing GSEs to buy mortgages in forbearance

    Federal Issues

    On October 21, FHFA announced an extension of a temporary policy related to the Covid-19 pandemic that allows Fannie Mae and Freddie Mac (GSEs) to purchase qualified single-family mortgages in forbearance that meet specific eligibility criteria. The policy is now extended for loans originated through November 30. As previously covered by InfoBytes, in an effort to provide liquidity to ensure continued lending during the Covid-19 pandemic, FHFA is allowing the GSEs to buy certain mortgages that enter forbearance within the first month after loan closing, prior to delivery to the GSEs.

    The extensions are implemented in updates to Fannie Mae Lender Letter LL-2020-06, and Freddie Mac Guide Bulletin 2020-41.

    Federal Issues FHFA Covid-19 Fannie Mae Freddie Mac GSE

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  • FDIC provides relief from audit, reporting requirements triggered by stimulus-related asset growth

    Federal Issues

    On October 20, the FDIC issued an interim final rule providing regulatory relief to insured depository institutions (IDIs) that have experienced significant, but temporary, asset growth due to government stimulus efforts. Previously, an IDI would be subject to annual independent audit and reporting requirements in any fiscal year in which its assets at the start of the year were $500 million or more. The interim rule permits IDIs to determine if they are subject to these requirements for fiscal years ending in 2021 based on their consolidated total assets as of December 31, 2019, or as of the beginning of their fiscal years ending in 2021, whichever is less. However, the rules also permit the FDIC to require IDIs to comply with the audit and reporting requirements if asset growth was related to a merger or acquisition. The rule will remain in effect through December 31, 2020, unless extended.

    Federal Issues Covid-19 FDIC Merger Aquisition

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  • FHA extends deadline for Covid-19 loss mitigation options

    Federal Issues

    On October 20, FHA announced that homeowners experiencing a Covid-19 financial hardship with FHA-insured mortgages can request an initial forbearance or a Home Equity Conversion Mortgage (HECM) extension through December 31. Specifically, Mortgagee Letter 2020-34 extends the date by which mortgagees must approve the initial Covid-19 forbearance or Covid-19 HECM extension originally provided for in ML 2020-06 and expanded in ML 2020-22 (covered by InfoBytes here and here). FHA notes that due to the continued Covid-19 pandemic and its impact on borrowers around the country, the agency is extending the deadline through December 31 from the original deadline of October 30.


    Federal Issues Covid-19 FHA HUD Forbearance Mortgages HECM

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  • FINRA postpones in-person arbitrations and mediations until 2021

    Federal Issues

    Recently, FINRA announced that all in-person arbitration and mediation proceedings will be postponed until January 1, 2021, except in certain specified circumstances. In particular, a proceeding may occur prior to that date: (1) if all parties to the arbitration or mediation agree to proceed in-person and the participants comply with state and local health orders; (2) if a panel orders that the arbitration or mediation take place telephonically or by Zoom; or (3) the parties stipulate that the proceeding may take place telephonically or by Zoom. 

    Federal Issues Covid-19 FINRA Litigation

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  • Financial Stability Board outlines global stablecoin recommendations

    Federal Issues

    On October 13, the Financial Stability Board (FSB) published a report providing high-level recommendations for the regulation, supervision, and oversight of “global stablecoin” (GSC) arrangements. FSB defines “stablecoins” as a “specific category of crypto-assets which have the potential to enhance the efficiency of the provision of financial services, but may also generate risks to financial stability, particularly if they are adopted at a significant scale.” GSCs are those with multi-jurisdictional reach that “could become systemically important in and across one or many jurisdictions, including as a means of making payments.” The report, Regulation, Supervision, and Oversight of “Global Stablecoin” Arrangements, follows an analysis of financial stability risks raised by GSCs as well as a survey of FSB and non-FSB members’ approaches to stablecoins. Prior to issuing the report, FSB also conducted several outreach meetings with representatives from regulated financial institutions, fintech firms, academia, and the legal field. The October report, which takes into account public feedback received earlier in the year, outlines 10 high-level recommendations that “call for regulation, supervision and oversight that is proportionate to the risks, and stress the value of flexible, efficient, inclusive, and multi-sectoral cross-border cooperation, coordination, and information sharing arrangements among authorities that take into account the evolving nature of GSC arrangements and the risks they may pose over time.” However, the report stresses that because these recommendations primarily address financial stability risks, issues such as anti-money laundering/combating the financing of terrorism, data privacy, cyber security consumer and investor protection, and competition are not covered. These issues, which may present consequences for financial stability if not properly addressed, should be incorporated as part of a comprehensive supervisory, regulatory, and oversight framework, the report states.

    Among other things, the report also provides regulatory authorities a guide “of relevant international standards and potential tools to address vulnerabilities arising from GSC activities,” and outlines a timeline of actions that will build a roadmap to ensure “any relevant international standard-setting work is completed.”

    Federal Issues Financial Stability Board Of Interest to Non-US Persons Stablecoins

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