,

July 2019 Compliance Journal: Compliance Notes

The below article is the Compliance Notes section of the July 2019 Compliance Journal. The full issue may be viewed by clicking here.

FinCEN issued an advisory to inform financial institutions of updates to the FATF list of jurisdictions with strategic AML/CFT deficiencies. Financial institutions should be aware of these changes, which may affect their obligations and risk-based approaches with respect to these jurisdictions. The advisory may be viewed at: https://www.fincen.gov/sites/default/files/advisory/2019-07-12/FATF%20Advisory%20June%202019%20FINAL%20508.pdf


FTC has stopped a student loan debt relief scheme, alleging it bilked more than $23 million from thousands of consumers with false claims that it would service and pay down their student loans. After the FTC filed a complaint seeking to end the deceptive practices, a federal court temporarily halted the scheme and froze its assets. According to the FTC’s complaint, since at least 2014, the operators of Mission Hills Federal and Federal Direct Group have lured consumers into paying hundreds to thousands of dollars in illegal upfront fees with false promises to lower consumers’ monthly student loan payments. The defendants also allegedly tricked consumers into submitting their monthly student loan payments directly to the defendants by falsely claiming to take over servicing the consumers’ loans. In reality, the defendants either only applied minimal payments on consumers’ loans or, in many instances, applied none of the payments to the loans, diverting consumers’ payments to themselves. The announcement may be viewed at: https://www.ftc.gov/news-events/press-releases/2019/07/ftc-stops-student-loan-debt-relief-scheme-charges-operators


CFPB has published an article debunking common military personal finances myths. Each year CFPB receives tens of thousands of complaints from servicemembers, veterans and their families about financial products and services, the article aims to arm consumers with the truth. The article may be viewed at: https://www.consumerfinance.gov/about-us/blog/five-myths-military-community-about-personal-finance/


HUD announced that it is partnering with the John Marshall Law School in Chicago and Cloudburst Consulting Group, Inc., to develop the National Fair Housing Training Academy (NFHTA). The Academy will prepare fair housing advocates, lawyers, investigators, and other stakeholders on effective strategies and techniques for addressing discriminatory housing policies and practices throughout the nation. The Academy will also play a central role in providing information and instruction that will advance the letter and spirit of the Fair Housing Act. Through this partnership, John Marshall Law School will receive $1.5 million over the next two years under HUD’s Community Compass Technical Assistance and Capacity Building grant program. John Marshall Law School will provide training related to civil rights history, current trends in housing discrimination, and investigating housing discrimination complaints. The announcement will be viewed at: https://www.hud.gov/press/press_releases_media_advisories/HUD_No_19_104


FDIC posted sections of its Applications Procedures Manual (manual) to its website to provide greater transparency regarding the FDIC’s internal processes. The manual provides direction for professional staff assigned to review and process applications, notices, and other requests (collectively, filings) submitted to the FDIC. This is the first in a series of releases that will comprise the complete manual, and each subsequent release will include multiple sections governing specific filing types. The manual may be viewed at: https://www.fdic.gov/regulations/applications/resources/apps-proc-manual/index.html


FDIC has updated sections of its Consumer Compliance Examination Manual. The updates include revisions to the Consumer Compliance Examinations and Third Party Risk, Appeals, SOURCE Violation Codes, Home Mortgage Disclosure Act, and Protecting Tenants at Foreclosure Act sections. The manual may be viewed at: https://www.fdic.gov/regulations/compliance/manual/index.html 


FRB released a white paper on synthetic identity payments fraud, a compilation of insights from Federal Reserve and industry subject matter experts. It’s intended to be a resource for industry professionals on the current state of synthetic identity fraud, including the scope of the issue, causes, contributing factors and its impact on the payments industry. Subsequent installments in the Payments Fraud Insights series will describe potential gaps in detection and mitigation approaches, as well as ideas and best practices to address the issue. The white paper may be viewed at: https://fedpaymentsimprovement.org/wp-content/uploads/frs-synthetic-identity-payments-fraud-white-paper-july-2019.pdf


CFPB released a report that explores patterns of revolving and repayment of credit card accounts in the United States. The data offers insights on how consumers use their credit cards as a line of credit rather as a payment mechanism, a topic which has not been the subject of extensive prior research. The report may be viewed at: https://files.consumerfinance.gov/f/documents/bcfp_data-point_credit-card-revolvers.pdf


FRB and the Federal Open Market Committee released the minutes of the Committee meeting held on June 18-19, 2019. A summary of economic projections made by Federal Reserve Board members and Reserve Bank presidents for the meeting is also included as an addendum to these minutes. The minutes may be viewed at: https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20190619.pdf


FRB has released May 2019 G.19 Consumer Credit data. Consumer credit increased at a seasonally adjusted annual rate of 5 percent. Revolving credit increased at an annual rate of 8-1/4 percent, while nonrevolving credit increased at an annual rate of 4 percent. The data may be viewed at: https://www.federalreserve.gov/releases/g19/current/default.htm


FATF issued Terrorist Financing Risk Assessment Guidance. FATF requires each country to identify, assess and understand the terrorist financing risks it faces in order to mitigate them and effectively dismantle and disrupt terrorist networks. Countries often face particular challenges in assessing terrorist financing risks due to the low value of funds or other assets used in many instances, and the wide variety of sectors misused for the purpose of financing terrorism. The guidance aims to assist practitioners, and particularly those in lower capacity countries, in assessing terrorist financing risk at the jurisdiction level by providing good approaches, relevant information sources and practical examples based on country experience. The guidance may be viewed at: http://www.fatf-gafi.org/media/fatf/documents/reports/Terrorist-Financing-Risk-Assessment-Guidance.pdf


U.S. and E.U. participants in the U.S.-E.U. Joint Financial Regulatory Forum met on June 25-26, 2019 in Brussels to exchange views on financial regulatory developments as part of their ongoing regulatory dialogue. At the meeting, U.S. and E.U. participants discussed financial supervisory and regulatory developments and future priorities. They exchanged views on various developments in financial markets, including potential implications of the UK’s withdrawal from the European Union. In the area of banking, participants discussed implementation of the final Basel III reforms, recent developments regarding host-country regulation of foreign banks, and resolution planning for global systemically important banks. The Treasury’s statement on the meeting may be viewed at: https://home.treasury.gov/news/press-releases/sm723


FRB announced that it is seeking individuals to serve on its Insurance Policy Advisory Committee on International Capital Standards and Other Insurance Issues (IPAC). The IPAC was established by the Economic Growth, Regulatory Relief, and Consumer Protection Act. More information may be viewed at: https://www.federalreserve.gov/newsevents/pressreleases/other20190703a.htm


CFPB updated the small entity compliance guide summarizing the Payday Lending Rule’s payment-related requirements. The guide has been updated to incorporate the changes that the Delay Final Rule made to the 2017 Payday Lending Rule. The compliance guide may be viewed at: https://files.consumerfinance.gov/f/documents/cfpb_payday_small-entity-compliance-guide.pdf


OCC issued a notice regarding its final rule to allow federal savings associations with total consolidated assets of $20 billion or less, as reported by the association to OCC on its call report as of December 31, 2017, to elect to operate as covered savings associations. The bulletin describes the process for federal savings associations to make an election by submitting its notice to the supervisory office. The bulletin may be viewed at: https://www.occ.gov/news-issuances/bulletins/2019/bulletin-2019-31.html


OFAC issued a reminder for the Annual Report of Blocked Property. Holders of blocked property are required to provide OFAC with a comprehensive list of all blocked property held as of June 30 of the current year by September 30. Persons that do not hold blocked property as of June 30 do not need to file an Annual Report of Blocked Property. The reminder may be viewed at: https://content.govdelivery.com/accounts/USTREAS/bulletins/24ebee2


FDIC announced its intentions to centralize the supervision and resolution activities for the largest banks and complex financial institutions in a new division to be named the Division of Complex Institution Supervision and Resolution (CISR). The new division will be responsible for FDIC’s supervision and monitoring of banks with assets greater than $100 billion for which the FDIC is not the primary federal regulator. On the resolution side, the new division will be responsible for planning and executing the FDIC’s resolution mandates for these institutions, as well as for other financial companies if called upon to protect U.S. financial stability. Currently, those activities are divided into three separate areas of FDIC. The notice may be viewed at: https://www.fdic.gov/news/news/press/2019/pr19056.html


FRB issued the June 2019 Senior Credit Officer Opinion Survey on Dealer Financing Terms (SCOOS) which collected qualitative information on changes over the previous three months in credit terms and conditions in securities financing and over-the-counter (OTC) derivatives markets. In addition to the core questions, the survey included a set of special questions seeking a longer-term perspective on the current use of financial leverage by hedge funds. The 23 institutions participating in the survey account for almost all dealer financing of dollar-denominated securities to nondealers and are the most active intermediaries in OTC derivatives markets. The survey was conducted during the period between May 14, 2019, and May 31, 2019. The survey may be viewed at: https://www.federalreserve.gov/data/scoos/scoos_201906.htm


FDIC submitted a statement entitled “Overseeing the Fintech Revolution: Domestic and International Perspectives on Fintech” before the U.S. House of Representatives Task Force on Financial Technology of the Committee on Financial Services. The statement may be viewed at: https://www.fdic.gov/news/news/speeches/spjun2519.html


FRB release the results of its annual Comprehensive Capital Analysis and Review (CCAR), showing the nation’s largest banks have strong capital levels and virtually all are now meeting supervisory expectations for capital planning. As a result, FRB is not objecting to the capital plans of all 18 firms but is requiring one firm to address limited weaknesses identified from the test. The report may be viewed at: https://www.federalreserve.gov/publications/files/2019-ccar-assessment-framework-results-20190627.pdf


OCC is moving to electronic fingerprinting to facilitate background checks performed in connection with applications and notices submitted to the OCC, including applications for charters, notices of acquisition of control, and notices to replace board members or senior management in certain institutions. OCC will begin using the new process in July 2019. The bulletin may be viewed at: https://www.occ.gov/news-issuances/bulletins/2019/bulletin-2019-29.html


FRB has submitted the 105th Annual Report to Congress of its operations during 2018. The report provides  minutes of Federal Open Market Committee meetings, financial statements of FRB and combined financial statements of the Reserve Banks, financial statements for Federal Reserve priced services, information on other services provided by the Reserve Banks, directories of Federal Reserve officials and advisory committees, statistical tables, and maps showing the System’s District and Branch boundaries. The report may be viewed at: https://www.federalreserve.gov/publications/files/2018-annual-report.pdf


FHFA released its first quarter 2019 Foreclosure Prevention Report, which shows that Fannie Mae and Freddie Mac (the Enterprises) completed 38,968 foreclosure prevention actions in the first quarter of 2019, bringing the total number of foreclosure prevention actions to 4,322,804 since September 2008. The report also shows that 38 percent of loan modifications completed in the first quarter reduced borrowers’ monthly payments by more than 20 percent. The Enterprises’ serious delinquency rate dropped to 0.71 percent at the end of the first quarter. This compares with 3.45 percent for Federal Housing Administration (FHA) loans, 1.87 percent for Veterans Affairs (VA) loans and 1.96 percent for all loans (industry average). The report may be viewed at: https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/FPR_1Q2019.pdf

By, Ally Bates