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Financial Services Law Insights and Observations


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  • Top "Smart TV" Manufacturer Agrees to Pay $2.2M to Settle FTC Smart TV Tracking Investigation

    Privacy, Cyber Risk & Data Security

    On February 6, the Federal Trade Commission (FTC) and the New Jersey Attorney General (NJAG) announced that they had entered into a $2.2 million settlement to resolve claims that a “smart” television manufacturer secretly gathered users’ viewing data and sold it to third parties who used the data for targeted advertising purposes. The settlement, which was approved by the FTC by a unanimous 3-0 vote, includes a payment of $1.5 million to the FTC and $700,000 to the New Jersey Division of Consumer Affairs, with an additional $300,000 in penalties to New Jersey suspended. The settlement also requires that the TV maker not misrepresent its data collection and sharing practices, prominently disclose its data collection and sharing practices and obtain permission from each consumer prior to collecting viewing data, delete most of the viewing data it already collected, implement a comprehensive privacy program, and undergo biennial third-party privacy assessments.

    Notably, in a concurring statement, acting FTC Chairman Maureen K. Ohlhausen emphasized that this settlement marks “the first time the FTC has alleged in a complaint that individualized television viewing activity falls within the definition of sensitive information.” Previously, the FTC had limited the definition of sensitive information to “financial information, health information, Social Security Numbers, information about children, and precise geolocation information.” Chairman Ohlausen noted “the need for the FTC to examine more rigorously what constitutes ‘substantial injury’ in the context of information about consumers” and indicated her intention to “launch an effort to examine this important issue further.”

    FTC Miscellany State Attorney General Privacy/Cyber Risk & Data Security

  • OFAC Sanctions More than Two Dozen Firms and Individuals in Connection with Iran's Ballistic Missile Program

    Federal Issues

    On February 3, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) announced that it was imposing new sanctions against several entities and individuals involved in procuring technology and/or materials to support Iran’s ballistic missile program, as well as for acting for or on behalf of, or providing support to, Iran’s Islamic Revolutionary Guard Corps-Qods Force. The sanctions block “all property and interests in property of those designated today subject to U.S. jurisdiction are blocked, U.S. persons are generally prohibited from engaging in transactions with” the identified firms and individuals.

    International Anti-Money Laundering Sanctions OFAC Miscellany

  • Japanese Multinational Electronics Corporation Discloses FCPA Investigation


    On February 2, a Japanese multinational electronics corporation disclosed that its U.S. subsidiary was being investigated by the DOJ and SEC for possible violations of the FCPA and other related laws.  According to its press release, the company is cooperating in the investigation and recently began settlement discussions with both agencies.  The countries at issue in the investigation have not been disclosed.

    Although the company had not spoken publicly about the probe until this week, the Wall Street Journal first reported the investigation in 2013.  The subsidiary company makes in-flight entertainment and communication systems for airlines.

    Securities FCPA SEC DOJ Miscellany

  • New DOJ Official to Oversee Fraud Section

    Financial Crimes

    Trevor McFadden, previously a partner with the law firm Baker McKenzie, was appointed Deputy Assistant Attorney General last month, with oversight over the Fraud and Criminal Appellate Sections.  He takes over from Sung-Hee Suh, who was appointed to the role in September 2014.

    Criminal Enforcement Fraud Miscellany Appellate

  • McWatters Named Acting NCUA Chairman

    Consumer Finance

    On January 25, President Trump appointed J. Mark McWatters as the acting chairman of the National Credit Union Administration (NCUA). McWatters succeeds Rick Metsger, who will remain a NCUA Board Member. McWatters was nominated to the NCUA Board by then-President Barack Obama on January 7, 2014 and took office following Senate confirmation on August 26, 2014. Prior to joining NCUA’s Board, McWatters—a licensed attorney and CPA—worked in a variety of public and private sector roles, including serving on the Governing Board of the Texas Department of Housing and Community Affairs and as a member of the Troubled Asset Relief Program Congressional Oversight Panel. He also served as counsel to House Financial Services Committee Chairman Jeb Hensarling (R-Texas), who, following McWatters’ appointment, issued the following statement:

    “I commend President Trump for appointing Mark McWatters to this key position. Mark is highly capable and extremely well qualified for this role. He brought a free market-oriented, transparent and accountable perspective to the NCUA Board. At a time when the regulatory burden of the Dodd-Frank Act has led to a drastic decline in the number of credit unions serving Americans, Mark’s leadership as Acting Chairman is greatly needed.”

    Banking NCUA Miscellany Trump Credit Union

  • FinCEN Issues Advisory Regarding FATF-Identified Jurisdictions with AML/CFT Deficiencies

    Federal Issues

    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.

    International FinCEN Miscellany Anti-Money Laundering Combating the Financing of Terrorism

  • OCC FinTech Proposal Draws a Range of Comments from Industry Stakeholders

    Consumer Finance

    A number of stakeholders submitted comment letters this week in response to the OCC's recent proposal to move forward with developing a special purpose national bank charter for financial technology (“FinTech”) companies and accompanying white paper outlining the OCC’s authority to grant such charters to FinTech companies and potential minimum supervisory standards for successful FinTech bank applicants. With the comment period for its white paper closing this week, the bank regulator drew a range of reactions from the stakeholders, several of which are described below:

    Consumer Bankers Association (CBA): In its comment letter, the CBA noted that the OCC needs to provide more clarity about the regulatory and supervisory framework that will be applied to FinTech companies, and to proceed cautiously and “provide the public with more information about the potential risks and rewards presented by” FinTech companies. The trade association recommended that the OCC utilize its new Office of Innovation and Responsible Innovation Framework to conduct a study of the FinTech sector to provide sufficient information to evaluate the need for and public benefits of a FinTech charter. Although the CBA confirmed support for “any effort to enhance the ability of banks to innovate,” it stated that it could not “yet support the inclusion of fintech companies into the federal banking system.”

    Independent Community Bankers of America (ICBA): In its comment letter, the ICBA stressed the need for the OCC to issue new chartering rules pursuant to the procedure under the Administrative Procedure Act, in consultation with the other bank regulators, and that ultimately these new institutions should be subject to the same supervision and regulation as community banks. The ICBA also expressed “strong concerns about issuing special purpose national bank charters to fintech companies without spelling out clearly the supervision and regulation that these chartered institutions and their parent companies would be subject to.”

    American Bankers Association (ABA). The ABA’s comment letter expressed support of a special purpose national bank charter for FinTech companies, as long as existing rules and oversight are applied evenly and fairly. The letter noted, among other things, that significant benefits of financial innovation for consumers are “only realized when innovations are delivered responsibly,” which can be ensured by regulation and oversight. The letter added that “answers to many difficult questions should be made before granting any special purpose charter, including how to ensure that regulations and consumer protection are applied evenly; what protections must be in place to preserve existing laws regarding the separation of banking and commerce; and how would enforcement of operating agreements be accomplished.” The ABA also urged the OCC to work with other agencies “carefully and cooperatively” before any new charter is approved.

    Financial Services Roundtable (FSR): Finally, a comment letter submitted by the FSR commended the OCC for developing the proposal, noting that regulations and regulators need to evolve with technology and changing customer preferences. The FSR letter noted that the OCC’s initiative should ensure parity among national charters, and not result in a two-tiered national banking system under which special purpose FinTech banks are subject to compromised supervisory standards. The letter added that to ensure parity in regulation and supervision, “the OCC may find it necessary to re-evaluate some standards applicable to full-service national banks and, as mentioned previously, examine the existing regulatory constraints inhibiting national banks from engaging in responsible innovation.”

    Banking OCC Miscellany Fintech

  • CFPB Seeks Advisory Council Applications

    Consumer Finance

    As explained in a January 16 blog post, the CFPB recently set up three “advisory groups”—the Consumer Advisory Board, the Community Bank Advisory Council, and the Credit Union Advisory Council—in anticipation that the groups would provide information about emerging trends and practices in the consumer financial marketplace and to open lines of direct communication with smaller financial institutions. On January 16, the Bureau requested applications seeking to fill vacancies in all three groups, which have seats that will become vacant in the fall of 2017. According to the post, the CFPB is seeking individuals with expertise in a variety of consumer protection issues, including representatives of banks serving underserved communities, representatives of communities impacted by higher priced mortgages, employees of credit unions and community banks, and academics. Applications are due March 1.

    Consumer Finance CFPB Community Banks Miscellany Credit Union

  • FinCEN Issues Guidance on Sharing Suspicious Activity Reports with U.S. Parents and Affiliates of Casinos

    Consumer Finance

    On January 4, the Financial Crimes Enforcement Network (FinCEN) issued guidance to “confirm that, under the Bank Secrecy Act (BSA) and its implementing regulations, a casino that has filed a Suspicious Activity Report (SAR) may share the SAR, or any information that would reveal the existence of the SAR, with each office or other place of business located within the United States of either the casino itself or a parent or affiliate of the casino.” As explained in the guidance, FinCEN expects that the anti-money laundering efforts of the casino’s affiliates could be enhanced by virtue of their access to a clearer and more comprehensive picture of the activities the casino has identified as suspicious. The guidance also specified that casinos may not share SARs or information that would reveal the existence of a SAR with non-U.S. offices or affiliates, individuals or entities within the casino’s corporate famile that perform functions unrelated to gaming, a financial institution without an independent SAR obligation, or unaffialited money services businesses located within the casino. Finally, the guidance specified that a domestic affiliate that receives a SAR or revealing information from a casino may not further share that SAR with an affiliate of its own.

    Banking Anti-Money Laundering FinCEN Bank Secrecy Act SARs Miscellany

  • FTC Hosts Its Second Annual PrivacyCon Event


    On January 12, the FTC hosted its second annual “PrivacyCon”—a public forum promoted by the regulator in order to “expand collaboration among leaders from academia, research, consumer advocacy, and industry on the privacy and security implications of emerging technologies.” Throughout the day, speaker panels presented research and opened the floor to discussions addressing five major topic areas: (i) the Internet of Things (IoT) and big data; (ii) mobile privacy; (iii) consumer privacy expectations; (iv) online behavioral advertising; and (v) information security. Among other things, panelists discussed the possibility of using machine learning to automatically block or permit user tracking and information collection by applications and websites based on the user’s past practices. Many panelists also examined data “leakage” from devices and the possible privacy and security issues that are raised by such leakage.

    A full version of the agenda, including links to abstracts of the research being presented, as well as a video recording of the event, is available online. Additional research not present but submitted without a request for confidential treatment is also available here.

    Securities Miscellany Privacy/Cyber Risk & Data Security


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