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State Financial Regulators Release BSA/AML Compliance Tool
On February 1, the Conference of State Bank Supervisors (CSBS) announced the release of its BSA/AML Self-Assessment Tool—a new, voluntary tool to help banks and non-depository financial institutions better manage Bank Secrecy Act/Anti-Money Laundering (BSA/AML) risk. Building upon CSBS’s efforts to help banks understand their risk exposure to third-parties, the self-assessment tool—developed jointly by the CSBS and state regulators—aims to help institutions better identify, monitor, and communicate BSA/AML risk, thereby reducing some of the burden and uncertainty surrounding compliance and facilitating more transparency within the financial sector. The self-assessment tool is available for use by any institution and may be accessed here. A narrated tutorial is also available here. Last year, CSBS released a white paper that outlines state supervision of money services businesses.
President Issues Executive Order to Study the DOL's Fiduciary Rule
On February 3, President Trump issued an Executive Memorandum directing the Department of Labor (DOL) to examine the Fiduciary Rule—an April 2016 DOL rule that expands the circumstances in which a person will be treated as a fiduciary under both ERISA and Section 4975 of the Internal Revenue Code by reason of providing investment advice to retirement plans and IRAs. In the memorandum, President Trump calls for an examination of the Fiduciary Rule to determine whether it (i) has harmed or is likely to harm investors; (ii) has resulted in dislocations or disruptions within the retirement services industry; and (iii) is likely to cause an increase in litigation and an increase in the prices that investors and retirees must pay to gain access to retirement services. If the Secretary of Labor makes any of these findings, the memorandum directs the Secretary of Labor to publish a proposed rule rescinding or revising the Fiduciary Rule. Initial compliance with the Fiduciary Rule is currently required by April 10, but the DOL has announced that it “will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
Special Alert: President Signs Executive Order Calling For Review of Financial Regulations
On February 3, President Trump signed an executive order (the Executive Order) directing the Treasury Secretary and the heads of the member agencies of the Financial Stability Oversight Council (FSOC) to review financial laws and regulations—including the Dodd-Frank Act and regulations implementing that law—thereby setting into motion a process by which the 2010 financial law could be significantly scaled back.
Under the Executive Order, the Secretary of the Treasury – who has yet to be confirmed – has 120 days to review and report to the President which existing laws, treaties, regulations, guidance, reporting and recordkeeping requirements promote the “core principles” listed below and those that do not. The core principles include:
- restoring public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework
- fostering economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry
- enabling American companies to be competitive with foreign firms in domestic and foreign markets
- advancing American interests in international financial regulatory negotiations and meetings
- preventing taxpayer-funded bailouts, and
- empowering Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth
Click here to read full special alert
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If you have questions about the order or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.
OFAC Sanctions More than Two Dozen Firms and Individuals in Connection with Iran's Ballistic Missile Program
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.
Senators Unveil Bill to Replace CFPB Director with Committee
On January 31, Senators Deb Fischer, R-Nebraska, John Barrasso (R-Wyo.) and Ron Johnson (R-Wisc.), reintroduced legislation that would replace the single director of the CFPB with a five-member bipartisan committee. Specifically, the proposed legislation provides that: (i) each board member would be appointed by the president and confirmed by the Senate; (ii) the president would appoint one of the five members of the board to serve as chairperson of the board; (iii) board members would each serve staggered five-year terms, and no more than three members would be from the same political party; and (iv) the legislation would take effect on the date on which not less than three persons have been confirmed by the Senate to serve as members of the board of directors.
Senator Fischer introduced similar legislation in both the 113th Congress and the 114th Congress.
Senators Introduce Joint Resolution to Overturn CFPB's Prepaid Rule; CFPB Releases Prepaid Rule Compliance Guide on Same Day
On February 1, Sen. David Perdue (R-Ga.), and six fellow GOP lawmakers introduced a joint resolution proposing to overturn the CFPB’s final rule on prepaid accounts (Prepaid Rule) before it goes into effect on October 1. The proposed resolution calls for applying the Congressional Review Act to set aside the regulation—which, procedurally, would require only a simple majority vote in the Senate and House and approval by President Trump.
As previously covered by InfoBytes, the Prepaid Rule amends Regulations E and Z to extend disclosure requirements and consumer protections to certain government benefit cards and mobile wallet accounts, payroll cards, Visa- or MasterCard-branded cards sold in retail outlets for general use, and other types of prepaid products. Generally, the Prepaid Rule becomes effective October 1, 2017. The Prepaid Rule does, however, contain certain exceptions and accommodations related to the October 1 effective date.
Earlier that same day, the CFPB issued a small entity compliance guide, which provides a summary of the Prepaid Rule and highlighting information that may be helpful when implementing its various provisions. Among other things, the compliance guide covers: definitions of various prepaid accounts, exclusions in the rule, entities subject to the rule, required disclosures, change-in-terms notices, limited liability and error resolution, periodic statements, receipts at electronic terminals, access devices, compulsory use, account agreements, overdraft credit features, remittances, and record retention. The compliance guide also discusses the exceptions and accommodations related to the effective date noted above, which are also listed in the Prepaid Rule’s Effective Dates Factsheet.
Global Money Services Business Reaches Settlements with 49 States and the District of Columbia
On January 31, state attorneys general from 49 states and the District of Columbia announced a $5 million settlement with a global money services business that resolves investigations into allegations that scammers used the company’s wire transfer services to defraud consumers over a period of 9 years. The company agreed to implement an anti-fraud program as part of the settlement, with the settlement funds paying for the states’ costs and fees. As discussed previously on InfoBytes, the company recently entered a $586 million settlement with the DOJ in connection with similar AML-related claims, which will be used for refunds to the victims of fraud-induced wire transfers.
NYDFS Fines German Bank $425 Million for Deficient Money Laundering Controls
On January 30, the New York Department of Financial Services (NYDFS) announced that it had assessed a $425 million fine against a German bank as part of a consent order addressing allegations that the bank allowed $10 billion in “mirror trades” involving Russian investors by failing to properly enforce protections against money laundering. According to the press release, the bank and several of its senior managers allegedly “missed key opportunities to detect, intercept and investigate a long-running mirror-trading scheme facilitated by its Moscow branch and involving New York and London branches.” Specifically, the consent order claims the bank (i) conducted its business in an unsafe and unsound matter; (ii) implemented weak “Know Your Customer” processes; (iii) failed to accurately rate its country and client risks for money laundering throughout the relevant time period and lacked a global policy benchmarking its risk appetite; (iv) maintained ineffective, understaffed anti-financial crime, AML, and compliance units; and (v) had a flawed corporate structure and organization.
In addition to the $425 million monetary penalty, the bank must, within 60 days of the consent order, engage an independent monitor to “conduct a comprehensive review of the [b]ank’s existing BSA/AML compliance programs, policies and procedures.” Furthermore, the bank must submit in writing for NYDFS review an action plan outlining enhancements to its current BSA/AML compliance programs.
Intervention by Lawmakers in PHH Case Denied by D.C. Circuit
On February 2, a federal appeals court in Washington, D.C., in a brief order, denied a motion by the Democratic Ranking Members of the Senate and House Committees with jurisdiction over the CFPB to intervene in PHH Corp. v. CFPB. The order also denied similar motions submitted by 16 state attorneys general and a coalition of interest groups. As previously covered on InfoBytes, the court is still considering a petition by the Bureau for rehearing an October ruling that said CFPB Director Richard Cordray may be removed by the president without cause.
CFPB Reaches Settlement with Arizona-Based Title Lender
On February 2, the CFPB announced a consent order and stipulation in an enforcement action against one of five Arizona-based title lenders under investigation for violations of TILA (see September 23 InfoBytes post). The terms of the February consent order and stipulation include a $10,000 civil money penalty as well as a mandatory requirement that the lender refrain from further violations of TILA and create a comprehensive compliance plan to ensure that its advertising practices for its title lending business conform to all applicable federal consumer financial laws and the terms of the consent order. On November 1 and December 20, 2016, the CFPB posted consent orders and stipulations against three of the other five title lenders (2016-CFPB-0018, 2016-CFPB-0019, 2016-CFPB-0021). The Bureau is still negotiating an agreement with the fifth title lender.