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FinCEN Assesses $75,000 Penalty Against Check Casher Business for Violating Anti-Money Laundering Laws
On March 18, the Financial Crimes Enforcement Network (FinCEN) assessed a $75,000 civil money penalty against a Colorado check casher and its general manager and ordered it to cease all business activities for “willfully violating” registration, reporting, and anti-money laundering provisions of the Bank Secrecy Act (BSA). The Colorado-based check casher had been the subject of three BSA compliance examinations by the Internal Revenue Service, “all of which found significant and repeated violations.” Under the BSA, money services business are required to implement anti-money laundering controls, conduct internal compliance reviews, and provide compliance training for all staff in an effort to prevent the facilitation of money laundering and the financing of terrorist activities. The Colorado check casher failed to employ such programs, which resulted in a significant amount of untimely and inaccurate currency transaction reports.
FINRA Announces $1.5 Million Sanction Against Broker-Dealer and Bars President for Fraud
On March 12, FINRA announced an order requiring a New York-based broker-dealer to pay over $1 million in restitution and $500,000 in fines for alleged fraud in sales of a private placement offering. According to the Order, from January 2011 to October 2011, the firm defrauded its customers by claiming – without performing sufficient due diligence – they would benefit from investing in the pre-initial public offering shares of a California-based automaker, but failed to disclose the criminal and adverse regulatory background of a key individual connected to the automaker. In addition to the $500,000 fine against the broker-dealer, its president has been barred from the securities industry. Under the settlement agreement, the broker-dealer and its president neither admitted nor denied the allegations.
North Dakota Grants Attorney General Power to Enforce Retail Installment Provisions
On March 12, the Legislative Assembly of North Dakota approved legislation H.B. 1346 amending the North Dakota Retail Installment Sales Act to grant enforcement authority to a state attorney or to the North Dakota Attorney General. Under the new law, the Attorney General has all powers provided under the Act, in addition to powers provided under the state’s Unlawful Sales or Advertising Practices law. The law as amended will be effective August 1, 2015.
DOJ Announces Settlement with California Bank Over BSA & FIRREA Violations
On March 10, the DOJ announced a $4.9 million civil and criminal settlement with a California-based bank. The bank admitted to the DOJ’s allegations that, from December 2011 through July 2013, it ignored warning signs indicating that its third party processor was defrauding hundreds of thousands of consumers by allowing fraudulent merchants to withdraw money from customers’ accounts without consent. The bank chose to ignore the complaints and inquiries it received regarding the third party processor’s activity, failing to terminate its affiliation with the entity or file a Suspicious Activity Report. The DOJ’s complaint alleges that the bank violated FIRREA; the $4.9 million settlement will cover both the criminal and civil charges, however under an agreed deferred prosecution agreement, criminal charges will be deferred for two years contingent upon the bank admitting to wrongdoing and giving up claims to approximately $2.9 million from accounts seized by the government.
New York DFS Takes Action Against Bank for BSA/AML Compliance Deficiencies
On March 12, the New York DFS issued a consent order against a Germany-based global bank for alleged Bank Secrecy Act and other anti-money laundering (BSA/AML) compliance violations that occurred between 2002 and 2008. According to the DFS’s press release, certain bank employees were selected “to manually process Iranian transactions — specifically, to strip from SWIFT payment messages any identifying information that could trigger OFAC-related controls and possibly lead to delay or outright rejection of the transaction in the United States.” The DFS also alleges that the bank’s New York branch failed to implement proper BSA/AML compliance thresholds, allowing certain alerts regarding suspicious transactions to be excluded. Under the terms of the consent order, the bank must pay a $1.45 billion penalty, to be distributed as follows: $610 million to the DFS; $300 million to the U.S. Attorney’s Office for the Southern District of New York; $200 million to the Federal Reserve; $172 million to the Manhattan District Attorney’s Office; and $172 million to the U.S. DOJ. Additionally, the order requires that the bank “terminate individual employees who engaged in misconduct, and install an independent monitor for Banking Law violations in connection with transactions on behalf of Iran, Sudan, and a Japanese corporation that engaged in accounting fraud.”
New York AG Announces Settlement with Three National Credit Reporting Agencies
On March 9, New York AG Eric Schneiderman announced a settlement agreement with three national credit reporting agencies. Schneiderman noted that inaccuracies in credit reports, such as the collection of debts not owed, misrepresentations of medical debt, identity theft or fraud, and identity mistakes on behalf of the agencies, continue to negatively affect consumers, most notably preventing minority and low-income individuals from gaining access to jobs and housing. The agencies fully cooperated with the NY AG’s office to find solutions to the credit report issues and, per the terms of the agreement, will (i) hire specially trained employees to review consumer documentation concerning identity theft or fraud and mixed files; (ii) review all disputes and supporting documentation submitted via the automated dispute resolution system; (iii) put into effect a 180-day waiting period before reporting any medical debts; (iv) increase the visibility of consumers’ right to access one free annual credit report via annualcreditreport.com; and (v) develop a National Credit Reporting Working Group to put in place a set of best practices and policies that will strengthen furnisher monitoring and data reporting. The full version of the settlement agreement provides additional requirements that the agencies must observe to increase fairness and effectiveness within credit reporting system.
Missouri Disbands Eight Payday Loan Operations
On March 5, Missouri AG Chris Koster announced an agreement to cease operations with eight unlicensed online payday loan businesses, provide $270,000 in restitution, and forgive all loan balances for Missouri consumers. According to Koster, an individual ran the numerous payday loan businesses from a Native American reservation in South Dakota and sold short-term loans to Missouri consumers, taking advantage of Missouri residents “through outrageous fees and unlawful garnishments.” The judgment obtained “permanently prohibits” the individual and his businesses from “making or collecting on any loans in Missouri, and it cancels existing loan balances for his Missouri customers.” Additionally, the judgment requires that the individual running the businesses inform all credit reporting agencies to remove the information they received on the customers who were negatively affected by the short-term loan sales.
Pennsylvania Orders Unlicensed Payday Lender to Refund Fees
On March 4, the Pennsylvania Department of Banking and Securities (DOBS) entered into a consent order with four payday loan companies for allegedly violating three Pennsylvania state laws: the Consumer Discount Company Act (CDCA), the Loan Interest Protection Law, and the Money Transmitter Act. From 2007 through January 2015, the companies allegedly acted together to sell short-term loans. According to the DOBS, the interest rate on some of the loans sold exceeded the statutory limit. The consent order also states that the company (i) was not licensed under the CDCA at the time of the marketing or selling of the loans; and (ii) did not have a money transmitter license. Immediately upon issuance of the order, the companies agreed to “cease and desist from engaging in the consumer discount business,” and within ninety days of the issue date of the order, the companies must remit to Pennsylvania consumers the balance of open and active accounts.
DOJ Reaches Settlement with National Bank Over Bankruptcy Practices
On March 3, the DOJ’s U.S. Trustee Program announced a $50 million settlement with a national bank to resolve allegations that the bank engaged in improper actions during bankruptcy proceedings. Under the terms of the settlement, the bank will provide relief in the form of cash payments, mortgage loan credits, and loan forgiveness to over 25,000 homeowners who are, or were, in bankruptcy. Additionally, the bank will acknowledge that (i) the bank’s former employees and the employees of an outside vendor improperly signed more than 50,000 payment change notices filed in bankruptcy courts around the country; (ii) the bank failed to file timely, accurate payment change notices; and (iii) the bank failed to provide timely, accurate escrow statements. The bank further will agree to enhance its technology, policies, procedures, internal controls and other oversight systems. Finally, the parties will agree to engage an independent reviewer to confirm the bank’s adherence to the terms of the settlement. The settlement is pending court approval.
FinCEN Fines Community Bank Over BSA Violations
On February 27, FinCEN announced a $1.5 million civil money penalty against a Pennsylvania-based community bank for violating the BSA. Of that amount, $500,000 will go to the OCC, the bank’s primary regulator, for BSA violations. According to FinCEN, the bank admitted failing to file suspicious activity reports on transactions involving a former state judge who received over $2.6 million in personal payments in connection with a judicial scheme involving the construction, operation, and expansion of juvenile detention centers.