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Pakistani Bank Reaches Agreement with NYDFS to Enhance AML Compliance Controls
Recently, the Federal Reserve and NYDFS announced that a New York branch of a Pakistani bank agreed to strengthen its compliance with BSA/AML requirements and OFAC regulations. The NYDFS’s and the NY Federal Reserve Bank’s recent examination into the bank’s branch found deficiencies related to its risk management and compliance with BSA/AML and OFAC regulations. Pursuant the agreement, the bank must submit written plans to the NYDFS and the NY Federal Reserve Bank on its strategy to improve its BSA/AML/OFAC compliance and its suspicious activity reporting. In addition, the bank must submit quarterly progress reports to the aforementioned regulators.
The recently issued agreement comes after a similar agreement earlier this month in which a New York branch of a Korean bank agreed to enhance its BSA/AML/OFAC compliance.
Massachusetts AG Healey Expands Abandoned Housing Initiative
On January 25, Massachusetts AG Maura Healey announced that she was expanding her Abandoned Housing Initiative (AHI) in response to an increasing number of cities and towns seeking assistance to revitalize their neighborhoods. Under the AHI, the AG’s office seeks to have delinquent owners bring their distressed and abandoned residential properties into code compliance. If the owner refuses, a court-approved receiver completes repairs on the property and receives compensation, utilizing funds from the nationwide state-federal settlement over unlawful foreclosures, once the property is sold. According to Helen Zucco, Executive Director at Chelsea Restoration Corporation, the program “gives banks an incentive to approve construction loans, allows funds to be loaned to receivers at very low interest, and creates a streamlined process for receivers to obtain the funds they need to achieve their important role in [the] process.”
New York DFS Proposes Anti-Terrorism and Anti-Money Laundering Regulation
On December 1, the New York DFS announced a proposed anti-terrorism and anti-money laundering regulation, Transaction Monitoring and Filtering Program Requirements and Certifications. Key requirements of the proposed regulation include maintaining programs (i) to monitor transactions after they’ve been executed for potential BSA/AML violations and Suspicious Activity Reporting; and (ii) to ban certain transactions that are prohibited by applicable sanctions, politically exposed persons lists, and internal watch lists. The proposed regulation outlines the programs’ respective minimum requirements, including ensuring that they are based on the Risk Assessment of the institution. Critically, the proposal also requires a Certifying Senior Officer of the regulated financial institutions to file with the Department executed certifications ensuring compliance with the requirements by April 15 of each year.
State-Chartered Bank Settles with New York DFS for Alleged Violations of Banking Law
On October 28, the New York DFS resolved an enforcement action with a New York State-charted bank for alleged violations of state banking law. The DFS alleged that the bank hired a former New York Federal Reserve Bank examiner and permitted him to work on matters for an entity that the employee had examined while at the New York Fed, in violation of a notice of post-employment restrictions from the New York Fed. The DFS also alleged that the employee obtained confidential regulatory or supervisory information from a now former New York Fed employee and distributed the information to a Managing Director at the bank for the purpose of advising the entity. In addition to the bank’s alleged failure to screen the employee from working on matters related to the entity he had examined, the DFS’s order alleges that the bank failed to “provide training to personnel regarding what constituted confidential supervisory information and how it should be safeguarded.” Under the settlement terms, the bank will (i) pay a civil money penalty of $50 million to the DFS; (ii) reform its policies and procedures to ensure the proper handling of confidential supervisory information and the monitoring of assignments of former government employees; and (iii) not re-hire the bank employee and Managing Director, who had been terminated as result of the matter.
CSBS and Federal Reserve Provide Insight on Opportunities and Challenges for Community Banks
On October 6, the CSBS released a summary of research presented and discussions had at the third annual Community Banking Research and Policy Conference, held September 30 through October 1. At the conference, community bankers, academics, and federal and state policymakers discussed trends in community banking, with a particular focus on small business and farm lending, community bank performance, and community banks pre- and post-financial crisis. 27 state regulators attended the conference and held a roundtable to address first-hand the challenges – such as increased regulatory burden and evolving technology – and opportunities community bankers face.
California Department of Business Oversight Issues Opinion Letter Declaring Foreign Check Clearing Services Not Subject to State's Money Transmission Act
On August 24, the California Department of Business Oversight issued a redacted opinion letter clarifying that foreign check clearing services are not considered money transmission subject to the Money Transmission Act. In order to fall under the state’s Financial Code’s definition of money transmission, a financial institution must receive money or monetary value for transmission within the United States. Emphasizing the domestic prerequisite outlined in the code, the DBO’s opinion indicates that if a bank establishes an exchange rate for an American financial institution that has received a check for deposit written against a foreign bank, the exchange rate service provided by the bank is considered a foreign check clearing service and not “receiving money or monetary value in the United States.” Accordingly, such check clearing activity does not fall under the California Financial Code’s definition of money transmission.
Financial Consulting Firm Agrees to Pay $15 Million to Resolve NYDFS Investigation
On August 18, a Washington D.C.-based financial consulting firm agreed to pay $15 million to resolve allegations that the firm failed to meet the current requirements of the NY Department of Financial Services (NYDFS) for consultants hired to perform regulatory compliance engagements. In addition to the $15 million penalty, the consulting firm agreed not to accept new engagements which require the NYDFS to disclose confidential supervisory information for six (6) months, and that it will attest that any reports submitted to the NYDFS on behalf of a client is objective and reflects the consulting firm’s best independent judgment. The Agreement follows a report released by the NYDFS detailing the consulting firm’s practices when preparing and submitting to the NYDFS reports of its findings regarding sanctions compliance with respect to certain transactions of a large, multi-national bank.
FinCEN Renews Southern California Geographic Targeting Order; Issues New Geographic Targeting Order on Border Cash Shipments in Texas
On August 7, FinCEN renewed a Geographic Targeting Order (GTO) for common carriers of currency at two border crossings in Southern California. Similarly, FinCEN issued a new GTO for carriers at eight major border crossings in Texas. Designed to increase the transparency of cross-border money movements, the GTOs temporarily amend the Report of International Transportation of Currency or Monetary Instruments (CMIR) requirements for common carriers of currency when transporting cash in amounts exceeding $10,000 across the two California borders and the eight Texas borders. The GTOs require the relevant common carriers of currency to disclose 100 percent of information in the CMIRs, eliminating “the reporting exemption for these carriers that might otherwise apply to transporting currency from a foreign person to a bank.” Additional changes to the CMIR reporting requirements include providing the names and addresses for the following persons: (i) the currency originator; (ii) currency recipient; and (iii) all other parties engaging in the movement of currency and monetary devices. The Southern California GTO extends the CMIR reporting requirements until February 4, 2016; the Texas GTO is effective September 17, 2015, and is valid through March 15, 2016.
Federal Reserve Orders Chinese Bank to Overhaul its BSA/AML Compliance Program
On July 21, a leading China-based bank agreed to address deficiencies in connection with the BSA/AML risk management and compliance program of its New York branch office. The Agreement, entered into with the Federal Reserve Bank of New York and the New York State Department of Financial Services, requires the bank and its New York branch to (i) enhance the branch’s written BSA/AML compliance program and customer due diligence program; and (ii) develop a written program for the branch that is capable of identifying and reporting suspected violations of law and suspicious transactions to law enforcement and supervisory authorities. In addition, the bank must hire an independent third-party to review the Branch’s U.S. dollar clearing transaction activity “to determine whether suspicious activity involving high-risk customers or transactions at, by, or through the branch was properly identified and reported” to the appropriate federal banking authorities. No civil money penalty was imposed on the bank.
NYDFS Superintendent Lawsky Announces Departure
On May 20, the NYDFS released a statement announcing that Superintendent Benjamin Lawsky will depart in late June. Lawsky, who became the newly created agency’s first superintendent in May 2011, stated: “I am deeply proud of the work our team has done building this new agency and helping strengthen oversight of the financial markets. We have assembled a great team at NYDFS and I have full confidence that the critical work of this agency will continue seamlessly moving forward.”