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Australian AML Regulator Fines Company For Failing to Register Affiliates
On January 21, the Australian Transaction Reports and Analysis Centre (AUSTRAC) announced a $122,400 penalty (Australian dollars) against a large financial services company for failing to register six affiliate businesses as remittance services providers. AUSTRAC serves as Australia’s regulator of anti-money laundering and counter-terrorism financing activities. AUSTRAC noted the company’s voluntary disclosure was taken into consideration when determining its enforcement approach.
SEC Fines Stock Exchanges
On January 12, the SEC fined two stock exchanges $14 million dollars for allegedly violating the Exchange Act by failing to accurately describe in their rules the order types being used on the exchanges. In its investigation, the SEC found that while operating under rules that described a single “price sliding” process for handling buy or sell orders, the exchanges actually offered three variations of “price sliding” order types. The SEC found that the “exchanges’ rules did not completely and accurately describe the prices at which those orders would be ranked and executable in certain circumstances, and they also failed to describe the execution priority of the three order types relative to each other and other order types.” Additionally, the SEC found that the exchanges disclosed certain information regarding how the order types operated to only some and not all of their members. The SEC determined that not all market participants were aware of how these order types operated. In addition to the $14 million penalty, the SEC order requires both exchanges, among other things, to (i) create and implement written policies and procedures related to the development of order types, and (ii) provide sufficient resources and regulatory staff to ensure regulatory functions are independent from their commercial interests. This is the SEC’s largest penalty against national securities exchanges.
CFPB Appoints Former Assistant U.S. Attorney As Head of Enforcement
On January 6, the CFPB appointed former federal prosecutor Tony Alexis as the head of its enforcement division. Alexis has served as the acting Director for over a year while his predecessor, Kent Markus, has been on medical leave. Markus is expected to return later this month to the Bureau as a senior adviser to Deputy Director Steve Antonakes.
FinCEN Fines Former CCO For Maintaining Ineffective AML Program
Recently, FinCEN announced a $1 million civil money penalty against the former Chief Compliance Officer (CCO) of a large financial services company for allegedly violating the Bank Secrecy Act (BSA) and its implementing regulations. In its complaint, FinCEN alleges that the CCO, from 2003 through 2008, failed to implement and maintain an effective AML program and file timely Suspicious Activity Reports as required by the BSA. As a result, the company’s money transfer system was used to carry out fraudulent activities causing customers to incur substantial losses. In addition to the penalty, FinCEN is seeking to prohibit the former CCO from participating, directly or indirectly, in the affairs of any financial institution.
Connecticut Banking Regulator Fines Tribal Payday Lenders
On January 6, the Connecticut Department of Banking issued a cease and desist order against the head of an American Indian tribe and two payday loan companies owned by the tribe for allegedly violating a state cap on interest rates. The order requires (i) the two companies pay a combined civil penalty of $800,000 and (ii) that the head of the tribe pay a civil penalty in the amount of $700,000.This action is considered to be the first enforcement action ever against the leader of a Native American tribe.
NCUA Files Latest Suit Over Purchased RMBS
On December 23, the NCUA announced its latest suit against a major bank. Filed in the SDNY, the 122-page complaint alleges that the bank violated state and federal laws by failing to fulfill its duties as trustee to 27 RMBS trusts. The NCUA is suing the bank in its capacity as liquidating agent for five failed federal credit unions who purchased the RMBS. This latest suit comes less than a week when the NCUA filed a similar suit against another large global bank.
NY Department of Financial Services Settles With Auto-Dealer
On December 19, the New York Department of Financial Services announced a recent settlement with a Long Island-based auto lender to resolve allegations of violations of several consumer protection laws including the DFA, TILA, NY Banking Law, and NY Financial Services Law. According to the consent judgment, the Defendants allegedly (i) failed to notify consumers who made overpayments on their accounts; (ii) miscalculated the interest charged to customers; and (iii) endangered the security of its customer information by leaving loan files openly around common areas. As part of the settlement, the auto dealer must (i) pay $3 million in penalties; (ii) pay full restitution plus nine percent interest to all affected customers; (iii) liquidate all remaining loans; and (iv) surrender its licenses in all states.
CFPB & State Attorneys General Fine Retailer and Debt Collectors for Alleged Illegal Debt Collection Practices Against Military Servicemembers
On December 18, the CFPB and the Attorneys General of North Carolina and Virginia announced an enforcement action against three affiliated companies offering credit and financing services to military servicemembers. The complaint filed in the Eastern District of Virginia alleges that the companies used illegal tactics to collect debts in violation of Dodd-Frank, including by (i) filing illegal lawsuits; (ii) debiting consumers’ accounts without authorization; and (iii) contacting servicemembers’ commanding officers. The complaint also charges that one of the companies violated the EFTA by failing to properly disclose the terms of preauthorized transfers, while another company violated TILA by failing to properly disclose terms and interest rates on the loans it offered to servicemembers. The CFPB and the Attorneys General filed a consent order in the district court to require the companies and their owners and chief officers to provide over $2.5 million in consumer redress, pay a $100,000 civil penalty, and undergo ongoing compliance monitoring for a period of five years.
CFPB Announces Enforcement Action Against Telecommunications Company for Alleged Unauthorized Third-Party Charges
On December 17, the CFPB filed a complaint in the Southern District of New York against a telephone company for allegedly charging its customers tens of millions of dollars in unauthorized third-party charges. According to the CFPB’s press release, for roughly a decade the company “crammed” consumers’ wireless bills with illegal charges by outsourcing payment processing for digital purchases – such as apps, games, and movies – to vendors known as “billing aggregators.” The CFPB alleges that the company failed to properly monitor the aggregators’ billing of customers as a payment processor for the third parties, and violated Dodd-Frank and the CFPA by (i) allowing third party vendors to attach illegitimate charges to consumers’ bills; (ii) billing customers for the unauthorized charges without their consent; (iii) failing to heed red flags showing that the system “was a breeding ground for unauthorized charges”; and (iv) failing to respond to consumer complaints. The complaint seeks refunds for consumers and penalties.
CFPB Files Suit Against Texas Company for Alleged Deceptive Practices Targeting Union Workers
On December 17, the CFPB announced it filed suit against a Texas-based company for allegedly deceiving consumers into paying fees to sign up for a “sham” credit card. According to the complaint filed in the Northern District of Texas, the CFPB alleges that the company falsely advertised a general-use credit card that, in actuality, could only be used to buy products from the company. The CFPB further alleges that the company deceptively implied an affiliation with unions by, among other things, using pictures of nurses, firefighters, and other public servants in its advertising. The complaint seeks compensation for consumers, a civil penalty, and an injunction against the company.