InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Mnuchin Open to Rethinking Regional, Midsize, Community Bank Regulations
Treasury secretary nominee Steven Mnuchin told members of the Senate Finance Committee that he supports rethinking regulatory requirements for regional banks in written responses following his confirmation hearing last week. Mr. Mnuchin, a former regional bank chief executive, strongly endorsed efforts to provide regulatory relief for regional, midsize and community banks, stating: “It is important that we have a regulatory environment that supports credit flows to all aspects of our economy, particularly in rural and less populated areas, and that small- and mid-sized institutions are not suffering from an inappropriate regulatory burden.” Mnuchin also questioned “whether it is appropriate for financial institutions that engage almost exclusively in traditional banking activities with consumers and businesses to be subject to measures intended for our largest and most complex financial institutions.” Moreover, when asked his thoughts concerning the Dodd-Frank Act, the nominee stated that he would focus on “addressing regulatory issues that limit banks' abilities to lend to small and medium-sized business that will create economic growth and create more jobs.”
NCUA Issues Guidance on CFPB Mortgage Servicing Rule, FDCPA Interpretive Rule
The National Credit Union Administration (NCUA) has issued a regulatory alert to federally insured credit unions regarding recent amendments to the CFPB's 2013 Mortgage Servicing Rule, issued on August 4, 2016, and the Bureau’s FDCPA interpretive rule concerning safe harbors from FDCPA liability. The recent amendments to the Mortgage Servicing Rule clarify (i) Regulation X (RESPA) provisions regarding force-placed insurance notices, mortgage servicing policies and procedures, early intervention, and loss mitigation requirements, and (ii) Regulation Z (TILA) provisions regarding prompt payment crediting and periodic statement requirements. The FDCPA interpretive rule provides safe harbor for servicers acting in compliance with specified mortgage servicing rules set forth in Regulations X and Z.
CFTC Extends Public Comment Period for Regulation Automated Trading (Reg AT) to May 1
On January 23, the CFTC extended the comment period for the supplemental proposal for Regulation Automated Trading (Regulation AT) from January 24 to May 1. Acting CFTC Chairman Chris Giancarlo recently announced his intention to “allow more time for public comments on the proposal” in light of “the complexity of the supplemental notice and the well-reasoned requests from interested parties.” Initially proposed in November 2015, the CFTC released a revised version of the rule in November 2016 in response to concerns expressed by trading firms over, among other things, the requirement that they make their source code available to the agency without a subpoena. All comments will be posted on the CFTC’s website.
President Trump Appoints Maureen Ohlhausen Acting FTC Chairman
On January 25, the FTC announced that President Trump has appointed Maureen K. Ohlhausen to serve as Acting Chairman of the FTC by a White House order. Commissioner Ohlhausen became an FTC commissioner in April 2012 and her current term is set to expire in 2018. In addition to the Acting Chairman, the FTC is headed by Commissioner Terrell McSweeny and fellow-democrat Edith Ramirez who steps down early next month and previously served as Chairwoman. The FTC also has two commissioner vacancies. “I am deeply honored that President Trump has asked me to serve as acting chairman of the FTC and to preserve America’s true engine of prosperity: a free, honest, and competitive marketplace,” Ohlhausen said in a statement. She added further that “[i]n pursuit of that mission” she “will ensure the Commission minimizes the burdens on legitimate business as we carry out this vital work.”
Global Money Service Business Settles Alleged AML and Consumer Fraud Allegations; Fined $586 Million in Settlement
On January 19, the DOJ announced that it had entered into Deferred Prosecution Agreement with a global money services business regarding allegations the company failed to maintain effective anti-money laundering program and aiding and abetting wire fraud. The announcement claims that between 2004 and 2012, the company “violated U.S. laws—the Bank Secrecy Act (BSA) and anti-fraud statutes—by processing hundreds of thousands of transactions for Western Union agents and others involved in an international consumer fraud scheme.” Under the terms of the Agreement, the business must forfeit $586 million and “implement and maintain a comprehensive anti-fraud program with training for its agents and their front line associates, monitoring to detect and prevent fraud-induced money transfers, due diligence on all new and renewing company agents, and suspension or termination of noncompliant agents.”
In a related case, the company also agreed to a consent order with the FTC to resolve parallel allegations by the FTC in a complaint filed on January 19 in the U.S. District Court for the Middle District of Pennsylvania. The complaint alleges that the company’s conduct violated Section 5 of the FTC Act and the Telemarketing Sales Rule.
FinCEN Issues Advisory Regarding FATF-Identified Jurisdictions with AML/CFT Deficiencies
As part of the Financial Crimes Enforcement Network’s (FinCEN’s) Financial Action Task Force’s (FATF’s) listing and monitoring process to ensure compliance with its international Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) standards, the FATF identifies certain jurisdictions as having “strategic deficiencies” in their AML/CFT regimes. The identified jurisdictions are listed in either of two documents: (i) the “FATF Public Statement”—which includes jurisdictions that are subject to the FATF’s call for countermeasures or are subject to Enhanced Due Diligence (EDD) due to their AML/CFT deficiencies, and (ii) “Improving Global AML/CFT Compliance: on-going process 21 October 2016”—which includes jurisdictions identified by the FATF to have AML/CFT deficiencies.
On January 19, FinCEN released an advisory updating the list of jurisdictions in which any such “strategic deficiencies” have been identified. FinCen urged financial institutions to consider these lists, including any and all updates thereto when reviewing due diligence obligations and risk-based policies, procedures, and practices.
The jurisdictions identified in the FATF Public Statement included:
- Democratic People’s Republic of Korea, and
- Iran.
The jurisdictions identified in Improving Global AML/CFT Compliance included:
- Afghanistan,
- Bosnia and Herzegovina,
- Iraq,
- Lao PDR,
- Syria,
- Uganda,
- Vanuatu, and
- Yemen.
Notably, Guyana, which was previously listed, has been removed from the October 2016 list.
Two More Former Hedge Fund Company Executives Charged by SEC in Far-Reaching Bribery Scheme
On January 26, the SEC charged two more former executives at an American hedge fund company with being the “driving forces” behind a massive bribery scheme across Africa that violated the FCPA. The civil complaint, which was filed in the United States District Court for the Eastern District of New York, alleges that the former head of the company’s European office in London, and an investment executive on Africa-related deals, caused “[the company] to pay tens of millions of dollars in bribes to government officials on the continent of Africa.” Specific allegations include that they induced Libyan authorities to invest in the company’s managed funds, and directed illicit efforts to secure mining deals by bribing government officials in Libya, Chad, Niger, Guinea, and the Democratic Republic of the Congo. In announcing the complaint, Chief of the SEC’s FCPA Unit, said the defendants “were the masterminds of the company’s bribery scheme that improperly used investor funds to pay bribes through agents and partners to officials at the highest levels of foreign governments.” The complaint seeks disgorgement and civil monetary penalties among other remedies.
The complaint follows the company’s payment last September of $412 million to the DOJ and SEC to settle criminal and civil charges in one of the largest ever FCPA enforcement actions. Previous FCPA Scorecard coverage of the company’s settlement with the DOJ and SEC can be found here.
SEC Investigating Multi-level Marketing Corporation for FCPA Violations in China
On January 20, a Los Angeles-based maker of nutritional supplements and weight management products, disclosed in a Form 8-K filing that it is being investigated by the SEC in connection with the company’s activities in China. The company said it is also conducting its own review and “has discussed the SEC’s investigation and the company’s review with the Department of Justice.” It also said it is cooperating with the SEC but “cannot predict the eventual scope, duration, or outcome of the matter at this time.”
The announcement comes months after the company agreed last July to pay $200 million in consumer redress to settle Federal Trade Commission allegations that it operated a pyramid scheme and “deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.” The FTC deal also required the company to “fundamentally restructure” its multi-level marketing operations and compensation structure.
American Casino and Resort Company Pays $7 Million Penalty to Resolve Criminal FCPA Charges
On January 17, Nevada-based gaming and resort company agreed to pay the DOJ nearly $7 million to resolve FCPA charges with a non-prosecution agreement (NPA) in connection with payments from 2006 to 2009 totaling almost $6 million to a business consultant to promote its brand in China and Macau. The company admitted that the payments were made “without any discernable legitimate business purpose,” that its executives had knowingly and willfully failed to implement adequate internal accounting controls to ensure that the payments were legitimate, and that it failed to prevent the false recording of those payments in its books and records, continued to make the payments even after warnings from its finance staff and an outside auditor, and terminated the finance department employee who raised those concerns.
The $7 million criminal penalty is a 25-percent discount from the bottom of the U.S. Sentencing Guidelines fine range. In announcing the NPA, the DOJ credited the company for its full cooperation in the investigation, including conducting a thorough internal investigation and voluntarily providing evidence and information to the DOJ, and its extensive remedial measures, including expanding its compliance and audit programs and making significant personnel changes. The DOJ found particularly notable that the company no longer employs or is affiliated with any of the individuals implicated in the investigation and hired a new general counsel and new heads of its internal audit and compliance functions.
In an unusual move, the DOJ’s announcement comes several months after the company resolved similar FCPA claims with the SEC in related proceedings last April. There the SEC filed a cease and desist order against the company and the company agreed to pay a civil penalty of approximately $9 million. The SEC alleged that the company violated the FCPA’s internal controls and books and records provisions in connection with more than $62 million in payments to a consultant operating in China and Macau who did not properly document how the money was used. The company had consented to the SEC’s order without admitting or denying the charges. Previous FCPA Scorecard coverage of the company’s SEC settlement can be found here.
Special Alert: Trump Administration Initiates “Regulatory Freeze”
Buckley Sandler Special Alert
On January 20, Reince Priebus, Chief of Staff to President Trump, issued a memorandum to the heads of executive departments and agencies initiating a regulatory review to be headed by the Director of the Office of Management and Budget (“OMB”). Congressman Mick Mulvaney (R-SC) has been nominated to fill that position.
On behalf of the President, the memorandum asks the following of the agency and department heads:
- No new regulations: “[S]end no regulation to the Office of the Federal Register (the ‘OFR’) until a department or agency head appointed or designated by the President after noon on January 20, 2017, reviews and approves the regulation.”
- Withdraw final but unpublished regulations: “With respect to regulations that have been sent to the OFR but not published in the Federal Register, immediately withdraw them from the OFR for review and approval.”
- Delay the effective date of published but not yet effective regulations: “With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum” and consider notice and comment to further delay the effective date or to address “questions of fact, law, or policy.” Following the delay, regulations that “raise no substantial questions of law or policy” would be allowed to take effect. For those regulations that do raise such questions, the agency or department “should notify the OMB Director and take further appropriate action in consultation with the OMB Director.”
Rulemakings subject to statutory or judicial deadlines are exempt, and the OMB Director has the authority to grant further exemptions for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.”
Click here to read full special alert
If you have questions about the “freeze” or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.