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  • President Obama Announces Plan to Nominate Federal Reserve Board Governor For Deputy Treasury Secretary

    Consumer Finance

    On July 31, President Obama announced that he will nominate Federal Reserve Board Governor Sarah Bloom Raskin as Deputy Treasury Secretary. Ms. Raskin was appointed to her current position by President Obama in October 2010, and her term is not due to end until January 2016. Prior to joining the Federal Reserve Board, Ms. Raskin served as Maryland’s Commissioner of Financial Regulation and before that was Managing Director at the Promontory Financial Group. She is a lawyer and previously served as the Banking Counsel for the U.S. Senate Committee on Banking, Housing, and Urban Affairs.

    Federal Reserve Department of Treasury

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  • Federal Authorities Announce Major Money Laundering Action Against Virtual Currency Service

    Financial Crimes

    On May 28, the DOJ announced the unsealing of an indictment against a global virtual currency service and seven of its principals and employees, alleging that the firm and its employees knowingly facilitated money laundering and operated an unlicensed money transmitting business. According to the DOJ, since 2001, the digital currency service allegedly facilitated an anonymous payment and value storage system that allowed more than one million users, including 200,000 Americans, to launder and store more than $6 billion in criminal proceeds and to facilitate approximately 55 million illicit transactions. The funds processed and stored by the system allegedly related to underlying criminal acts including identity theft, computer hacking, and child pornography. Federal law enforcement authorities also seized several Internet domain names involved in the scheme and effectively blocked access to any funds in the system. Concurrently, the Treasury Department for the first time exercised its powers under Section 311 of the USA Patriot Act against a virtual currency provider, declaring the provider to be a “prime money laundering concern,” which will prohibit covered U.S. financial institutions from opening or maintaining correspondent or payable-through accounts for foreign banks that are being used to process transactions through the virtual currency service.

    Anti-Money Laundering Department of Treasury DOJ Virtual Currency

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  • State Department Finalizes Burma Investment Reporting Requirements

    Federal Issues

    On May 23, the State Department announced that the Office of Management and Budget approved the final Burma Responsible Investment Reporting Requirements. Effective immediately, pursuant to General License No. 17, all U.S. persons with aggregate investment in Burma over $500,000 are subject to the reporting requirements, which generally cover a range of policies and procedures with respect to investments in Burma, including human rights, labor rights, land rights, community consultations and stakeholder engagement, environmental stewardship, anti-corruption, arrangements with security service providers, risk and impact assessment and mitigation, payments to the government, any investments with the Myanmar Oil and Gas Enterprise (MOGE), and contact with the military or non-state armed groups. The State Department will use the information collected to conduct to encourage U.S. businesses to develop robust policies and procedures to address a range of impacts resulting from their investments and operations in Burma.

    Department of Treasury

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  • Financial Stability Oversight Council Releases 2013 Annual Report

    Lending

    On April 25, the Financial Stability Oversight Council (FSOC) met in an open session to announce the release of its 2013 Annual Report to the Congress. The Annual Report outlines the FSOC’s views with regard to, among other things, (i) the need for housing finance reform to attract private capital to the housing finance system, (ii) increased awareness of operational risks, whether from cyberattack or acts of nature, and (iii) the importance of working with foreign counterparts to reform the governance and integrity of interest reference rates like LIBOR. FSOC Chairman and Treasury Secretary Lew also advised that the FSOC met in executive session to discuss its continuing analysis of non-bank financial companies and that he expects a vote on an initial set of systemically important designations of non-bank financial companies soon.

    FSOC Department of Treasury LIBOR

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  • Regulators, Lawmakers Scrutinize BSA/AML Compliance and Enforcement

    Financial Crimes

    On March 7, the Senate Banking Committee held a hearing entitled “Patterns of Abuse: Assessing Bank Secrecy Act Compliance and Enforcement,” which featured testimony from representatives of the Treasury Department, the Comptroller of the Currency; and the Federal Reserve Board. During the hearing, Senators challenged the regulators on what they view as insufficient civil and criminal enforcement of the Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) rules, and pressed them to act more aggressively in bringing criminal actions against banks. Senators also pressed lawmakers on comments made by Attorney General Holder at a hearing the day before where he expressed concern that some of the world’s biggest banks have become “too big to jail” because a potential punishment could negatively impact the broader economy. With regard to possible regulatory and legislative changes, Comptroller of the Currency Thomas Curry stated that the OCC is drafting guidance for banks on BSA/AML compliance, in part, to make it easier for the OCC to remove bank officers who violate federal anti-money laundering laws. Curry said the OCC also would support expanded safe harbors for banks submitting and sharing Suspicious Activity Reports. Comptroller Curry’s comments at the hearing follow remarks he made earlier in the week when he called on banks to devote more resources to BSA/AML compliance. Mr. Curry stressed that controls with regard to international activities – e.g., foreign correspondent banking and remote deposit capture – need to be commensurate with risk. He also directed banks to focus on third-party relationships and payment processors. Finally, the Comptroller cautioned banks to understand risks presented by deployment of new technologies and payment activities, including prepaid access cards, mobile banking, and mobile wallets.

    Federal Reserve OCC Anti-Money Laundering Bank Secrecy Act Department of Treasury U.S. Senate

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  • Senate Confirms Jack Lew as Treasury Secretary

    Consumer Finance

    On February 27, the U.S. Senate confirmed President Obama’s nominee for Treasury Secretary, Jack Lew, by a vote of 71-26. Mr. Lew most recently served as President Obama’s Chief of Staff, but also twice served as Director of the OMB, and held executive positions at Citigroup and New York University.

    Department of Treasury

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  • Senate Confirms FHA Commissioner and Other Key Agency Nominees

    Consumer Finance

    On December 30, the Senate confirmed Carol Galante as Assistant Secretary of Housing and Urban Development and Federal Housing Administration Commissioner. Ms. Galante, who was nominated for the position in October 2011, has been serving in an acting role. Her confirmation was made possible after certain Senators, including Bob Corker (R-TN), who had expressed concerns about the pace of reforms at the FHA, secured a commitment from Ms. Galante to (i) place a moratorium on the full drawdown reverse mortgage program, (ii) substantially increase underwriting criteria for borrowers with FICO scores between 580 and 620 by establishing a meaningful maximum debt-to-income ratio, (iii) increase the down payment requirement and the insurance pricing for loans between $625,000 and $729,000, and (iv) increase underwriting requirements for borrowers who have been foreclosed upon within the last seven years. On January 1, as described in media reports, the Senate confirmed Joshua Wright as FTC Commissioner and Mignon Clyburn as FCC Commissioner, and also confirmed Richard Berner for the new position of Director of the Treasury Department’s Office of Financial Research.

    FTC HUD FCC Department of Treasury FHA

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  • AML Regulatory Initiatives Highlighted at ABA/ABA Money Laundering Enforcement Conference

    Financial Crimes

    Last week, Treasury Under Secretary for Terrorism and Financial Intelligence, David Cohen, and new FinCEN Director Jennifer Shasky Calvery addressed the American Bankers Association/American Bar Association Money Laundering Enforcement Conference. Ms. Calvery and Mr. Cohen announced the formation of an interagency anti-money laundering (AML) task force comprised of Treasury officials, federal banking regulators, and enforcement agencies charged with conducting a comprehensive review of the AML regulatory and enforcement structure to address any gaps, redundancies or inefficiencies in the framework. Ms. Calvery further explained that the Bank Secrecy Act Advisory Group is exploring ways to reduce the variance between compliance risk and illicit financing risk. Ms. Calvery also stressed the importance of electronic filings, and urged financial institutions to adopt the new FinCEN reports before the April 1, 2013 deadline. Mr. Cohen discussed a proposed customer due diligence regulation, which would extend customer due diligence obligations by requiring institutions to collect information on an account’s beneficial owner. In connection with that rulemaking, FinCEN this week announced the last in a series of roundtable discussions to gather information from stakeholders and discuss key issues relating to the proposed rule. This final roundtable will be held on December 3, 2012, at the Miami Branch of the Federal Reserve Bank of Atlanta.

    Anti-Money Laundering FinCEN Bank Secrecy Act Department of Treasury

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  • Federal Regulators Host Webinar on SCRA Compliance

    Consumer Finance

    On September 10, federal banking regulators, the CFPB, and the FHFA conducted a webinar on federal servicemember financial protections, recent changes to the Servicemembers' Civil Relief Act (SCRA), and recent changes to Fannie Mae and Freddie Mac short sale procedures for servicemembers and loan modification options for servicemembers. The event featured compliance and enforcement updates from the CFPB, the DOJ, and the OCC. Ann Thompson from the CFPB Office of Nonbank Supervision described recent joint agency guidance regarding servicemembers with Permanent Change of Station (PCS) Orders as an extension of the CFPB's mortgage servicing exam procedures. Ms. Thompson explained that the CFPB will look at bank and nonbank servicers' policies and procedures to determine their adequacy for handling servicemembers with PCS orders. If there are deficiencies, the CFPB may take supervisory or enforcement actions to support implementation of the guidance. Eric Halperin from the DOJ's fair lending unit provided an update on enforcement activity and described a recent SCRA enforcement action against a national bank that covered all aspects of SCRA, not just foreclosure protections, as the model for the DOJ moving forward. Finally, Kimberly Hebb from the OCC offered some considerations for institutions seeking to comply with SCRA. She explained that the SCRA compliance process need not stand alone. For example, with regard to the law's rate reduction requirements, compliance steps could be incorporated into existing processes for error resolution. Ms. Hebb also stressed documentation and record keeping, pointing out that while the law does not include a specific record retention requirement, examiners will want to see the full scope of compliance processes documented for use in determining compliance.

    FDIC CFPB Federal Reserve OCC Servicemembers SCRA Department of Treasury DOJ

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  • Treasury Announces More Steps to Wind Down Fannie Mae and Freddie Mac

    Lending

    On August 17, the U.S. Department of Treasury announced new steps to accelerate the wind down of Fannie Mae’s and Freddie Mac’s (the GSEs) government-backed portfolios. Treasury is modifying its Preferred Stock Purchase Agreements with the FHFA to wind down the GSEs’ portfolios at an annual rate of fifteen percent, moving up the time by which the portfolios must meet the existing $250 billion target. The amended agreements also (i) require that each GSE submit an annual plan on actions to reduce taxpayer exposure to mortgage credit risk and (ii) replace the current ten percent dividend payments to Treasury with a quarterly sweep of every dollar of profit made by each GSE.

    Freddie Mac Fannie Mae FHFA Department of Treasury

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