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OFAC Clarifies Iran Sanctions Snapback, Also Amends General License Regarding Foreign Flights to Iran
On December 15, OFAC updated the Frequently Asked Questions Relating to the Lifting of Certain U.S. Sanctions Under the Joint Comprehensive Plan of Action, clarifying two FAQs regarding the re-imposition of sanctions in the event of a “sanctions snapback.” Among other things, the revised guidance clarified that the U.S. will not retroactively impose sanctions for activity considered legitimate during the time of the transaction, but that activity would have to immediately halt because the agreement does not grandfather existing contracts. In addition, OFAC explained that the U.S. would provide non-Iranian foreigners a 180-day period to wind down operations that were authorized prior to a snapback. The FAQ-guidance also explained that if a snapback of sanctions were to result in the revocation of licenses, the U.S. government would provide a 180-day wind-down period for those deals, and non-Iranian foreigners could receive repayment from Iranians for goods and services provided prior to a snapback under the terms of an existing contract.
Separately, OFAC issued amended license General License J-1, regarding foreign flights to Iran, to also authorize flights that involve code-sharing agreements. A code-share is a marketing arrangement in which an airline places its designator code on a flight operated by another airline, and sells tickets for that flight. GL J-1 is effective as of December 15 and replaces and supersedes General License J in its entirety.
Gabonese National Pleads Guilty to Bribing Government Officials in Africa in Connection with Global Management Firm Mining Operations
On December 9, 2016, the son of a former Prime Minister of Gabon pleaded guilty to conspiring to make corrupt payments to government officials in Africa in violation of the FCPA. The Gabonese national worked as a consultant for a joint venture between the company and an entity incorporated in the Turks and Caicos. The DOJ charged him with conspiring to pay approximately $3 million in bribes to high-level government officials in Niger, as well as providing them with luxury cars, in order to obtain uranium mining concessions. Similarly, the DOJ also charged him with bribing a high-ranking government official in Chad with luxury foreign travel for the official and his wife in order to obtain a uranium mining concession there. In addition, the DOJ charged him with bribing government officials in Guinea with cash, the use of private jets, and a luxury car in order to obtain confidential government information.
The guilty plea comes on the heels of the company’s $412 million settlement with the DOJ and SEC to resolve related criminal and civil charges of violating the FCPA in connection with the bribery of high-level government officials across Africa. The settlement represented the fourth largest FCPA financial penalty at the time. The company’s CEO and former CFO have also previously settled related civil allegations. Prior Scorecard coverage of the company’s settlement with the DOJ and SEC may be found here.
On December 12, the Fed announced additional details addressing the way in which banking entities may seek an extension of the July 21, 2017 deadline by which they are to divest assets that are not permitted by the Volcker Rule. According to the Fed, illiquid legacy investments are expected to generally qualify for deadline extensions of up to five years, as long as the company has made appropriate efforts to deal with those investments, has an adequate compliance program, and the Fed is not concerned that the company is attempting to evade the deadline. The Fed has also made available both a Supervision and Regulation Letter (SR 16-18) and a statement of policy that describe its expectations when an application for an extension is submitted.
On December 9, the GAO released a report detailing the results of its audit of “permanent funding authorities”—a term it defines as “entities with authority to collect and obligate funds without further congressional action.” The report, entitled Permanent Funding Authorities: Some Selected Entities Should Review Financial Management, Oversight, and Transparency Policies: (i) describes the different types of authorities for entities funded by fines and penalties and for regulatory entities; (ii) assesses the policies and procedures related to agencies’ and other entities’ management of their permanent funding authorities; and (iii) makes recommendations to ensure efficient use of resources.
In conducting its audit, the GAO examined five case studies that illustrate the variation in permanent funding authorities: the Department of Agriculture’s Animal and Plant Health Inspection Service (APHIS); the CFPB; the DOJ’s Crime Victims Fund (CVF); the Gulf Coast Restoration Trust Fund (Trust Fund); and the Public Company Accounting Oversight Board (PCAOB), overseen by the SEC. Based on its review, the GAO recommended that in order to “ensure efficient resource use,” APHIS, the CFPB, and the SEC—in its oversight of PCAOB—should review reserve targets. To facilitate oversight, the SEC should establish time frames for PCAOB’s annual report. According to the report, the Department of Agriculture, CFPB, PCAOB, and SEC agreed with GAO’s recommendations.
On December 13, nearly five and a half years after assuming supervisory responsibility for savings and loan holding companies (SLHCs), the Fed is seeking comments on a proposal to fully apply the same supervisory rating system to savings and loan holding companies as currently applies to bank holding companies—a rating system commonly referred to as the “RFI rating system.” The RFI rating system generally grades a holding company’s risk management (R), financial condition (F), and impact (I) of non-depository entities on subsidiary depository institutions. Although the proposal would fully apply the rating system to most SLHCs supervised by the Fed, it would not apply to SLHCs engaged in significant insurance or commercial activities. These firms would instead continue to receive indicative ratings. Comments on the proposal must be received by Feb. 13, 2017.
On December 12, the CFPB announced the release of a brief on credit invisibility, following up on a 2015 report, which found that 26 million Americans—or one in 10 adults—do not have a credit history with one of the nationwide credit reporting companies. According to CFPB research, an additional 19 million consumers have “unscorable” credit files—i.e., files that are thin or contain insufficient or too brief credit history—and thus, overall, there are 45 million consumers who may be denied access to credit because they do not have credit records that can be scored. The Bureau also provided a checklist for consumers that incorporates the information from the post and identifies actions that consumers can take concerning credit reports. According to the CFPB, consumers should obtain and read credit reports and act quickly to correct any errors they may find in the reports.
On December 13, the FDIC announced that its board of directors has approved a $2.18 billion operating budget for 2017, representing a 2.4 percent decrease from 2016 and a 46 percent decrease from its peak funding in 2010 at the height of the financial crisis. Commenting on the budget and staffing levels, FDIC Chairman Martin J. Gruenberg said, “This is the seventh consecutive reduction in the FDIC’s annual operating budget. These reductions are made possible by continuing steady improvement in the health of the U.S. banking industry.”
On December 8, Congress passed the Global Magnitsky Human Rights Accountability Act as part of the National Defense Authorization Act for 2017, which now awaits President Obama's signature. Championed by U.S. Senators Ben Cardin (D-Md.), Ranking Member of the Foreign Relations Committee, and John McCain (R-Ariz.), Chairman of the Armed Services Committee, the bill gives the President of the United States the authority to deny human rights abusers and corrupt officials entry into the United States or access to our financial institutions. The bipartisan legislation builds on the Russia-specific Sergei Magnitsky Rule of Law Accountability Act of 2013 to apply sanctions globally, and makes significant acts of corruption sanctionable offenses.
CFPB Releases Student Banking Report Examining Credit Card Marketing Deals Targeting College Students
On December 14, the CFPB released a student banking report analyzing roughly 500 marketing agreements between colleges, universities and affiliated organizations, and large banks in an effort to identify trends in the school-sponsored credit card market. The report found in part that while credit cards offered in conjunction with educational institutions have declined since the CARD Act was enacted in 2009, many similar offers and deals still exist and may include features that lead students to rack up hundreds of dollars in fees. As explained by CFPB Student Loan Ombudsman Seth Frotman, “Colleges across the country continue to make deals with banks to promote products that have high fees, despite the availability of safer and more affordable products.” According to Mr. Frotman, “Students shouldn’t get stuck with the bill when their school inks a deal for an account that’s not in their best interest.”
In conjunction with the publication of this report, the Bureau also published a new compliance bulletin to assist colleges in understanding their obligations under the CARD Act and Regulation Z related to college credit card agreements. This bulletin noted, among other items, that many of the largest colleges and universities do not publish credit card agreements on their websites or make them available to students and the public upon request, creating increased risks of non-compliance. The complete set of credit card agreement data collected by the Bureau in accordance with its obligations under the Credit CARD Act of 2009 can be accessed here.
On December 14, the DOJ announced that it has obtained more than $4.7 billion in settlements and judgments in civil cases involving fraud and false claims against the government in fiscal year 2016 (ending September 30). Of the $4.7 billion recovered, $2.5 billion came from the health care industry, including drug companies, medical device companies, hospitals, nursing homes, laboratories, and physicians. The DOJ also recovered $1.6 billion from housing and mortgage settlements and judgments this past fiscal year – the second highest annual recovery in the history of the federally insured mortgage program.
There were 845 new False Claims Act suits in 2016, one of the largest totals in history. Of those, 143 were initiated by the government and 702 were brought by whistleblowers. Approximately $100 million was recovered in cases handled exclusively by whistleblowers and their attorneys—a sharp drop from the record $1.1 billion recovered in 2015, but an amount comparable to the averate amount recovered in previous years. Notably, the $4.7 billion recovered in 2016 does not include state shares. Such shares were significant in 2016 because of payouts involving the federal-state Medicaid program, with the top three health care settlements alone resulting in distributions of approximately $500 million to states.
- Jeffrey P. Naimon to discuss "Post-pandemic CFPB exam preparation" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Making fair lending work for you" at the Mortgage Bankers Association Spring Conference & Expo
- Jonice Gray Tucker to discuss "Reading the tea leaves of President Biden’s initial financial appointees" at LendIt Fintech
- APPROVED Webcast: Staying in the know with Buckley regtech solutions
- Moorari K. Shah to discuss “CA, NY, federal licensing and disclosure” at the Equipment Leasing & Finance Association Legal Forum
- Jonice Gray Tucker to discuss "Compliance under Biden" at the WSJ Risk & Compliance Forum
- Sherry-Maria Safchuk to discuss UDAAP at an American Bar Association webinar
- Jeffrey P. Naimon to discuss "What to expect: The new administration and regulatory changes" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Jonice Gray Tucker to discuss “The future of fair lending” at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Steven R. vonBerg to discuss "LO comp challenges" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss "Major litigation" at the Mortgage Bankers Association Legal Issues and Regulatory Compliance Conference
- Michelle L. Rogers to discuss “The False Claims Act today” at the Federal Bar Association Qui Tam Section Roundtable