Top Story Compliance Related

The Treasury Department yesterday announced that OFAC was designating Hilltop Youth, a violent extremist group that has repeatedly attacked Palestinians and destroyed Palestinian homes and property in the West Bank.

The Treasury Department alsoreported that OFAC was designating seven individuals and two entities associated with the Russia-based cybercriminal group Evil Corp, in a tri-lateral action with the United Kingdom’s Foreign, Commonwealth & Development Office (FCDO) and Australia’s Department of Foreign Affairs and Trade (DFAT). Additionally, the U.S. Department of Justice has unsealed an indictment charging one Evil Corp member in connection with his use of BitPaymer ransomware targeting victims in the United States.

For identification information on the sanctioned individuals and entities, see BankersOnline’s October 1, 2024, OFAC Update.

The Securities and Exchange Commission has announced charges against registered broker-dealer TD Securities (USA) LLC for manipulating the U.S. Treasury cash securities market through an illicit trading strategy known as spoofing. The bank was also charged for failing to supervise the then-head of its U.S. Treasuries trading desk, who allegedly made hundreds of illegal trades over a 13-month period.

According to the SEC's order, between April 2018 and May 2019, the former TD Securities trader spoofed the U.S. Treasury cash securities market by entering orders on one side of the market that he had no intention of executing (herein, non-bona fide orders), so he could obtain more favorable execution prices on bona fide orders he was entering simultaneously on the other side of the market. After the bona fide orders were filled, resulting in profits to TD Securities, the trader allegedly then canceled the non-bona fide orders. The SEC’s order also finds that TD Securities lacked adequate controls and that it failed to take reasonable steps to scrutinize the trader after receiving warnings of his potentially irregular trading activity.

TD Securities consented to the entry of the SEC’s order finding that it violated an antifraud provision of the federal securities laws and failed to reasonably supervise the trader. TD Securities was further ordered to cease and desist from future violations of the relevant antifraud provision, was censured, and was ordered to pay disgorgement of $400,000, prejudgment interest, and a civil penalty of $6.5 million. In a related matter, TD Securities has entered into a deferred prosecution agreement with the U.S. Department of Justice and has agreed to pay a total monetary sanction of more than $15 million as part of that agreement, of which $400,000 will be credited by disgorgement to the SEC. TD Securities has separately agreed to pay a $6 million fine to the Financial Industry Regulatory Authority to resolve related charges.

On Friday, the Treasury Department announced OFAC actions to defend and protect U.S. campaign and government officials from Iranian attempts to interfere in U.S. elections. OFAC designated seven individuals as part of a coordinated U.S. government response to Iran’s operations that sought to influence or interfere in the 2024 and 2020 presidential elections.

For the names and identification information of the designated individuals, see Friday's BankersOnline OFAC Update.

The FDIC has issued guidance to help banks and facilitate recovery in areas of Georgia (FIL-68-2024) and Vermont (FIL-69-2024) affected by severe weather.

The OCC has expanded the reach of its earlier announcement allowing banks in the path of Hurricane Helene to close. Yesterday, the OCC issued a proclamation allowing national banks, federal savings associations, and federal branches and agencies of foreign banks to close offices in areas of North Carolina, South Carolina and Virginia affected by Hurricane Helene, if they are affected by potentially unsafe conditions as a result of the storm.

The Treasury Department has reported actions taken by OFAC in a coordinated international effort to disrupt Russian cybercrime services. FinCEN has issued a notice on Imposition of Special Measure Prohibiting the Transmittal of Funds Involving PM2BTC that identifies a Russian virtual currency exchanger associated with Russian individual Sergey Sergeevich Ivanov—as being of “primary money laundering concern” in connection with Russian illicit finance. Concurrently, the Office of Foreign Assets Control (OFAC) is sanctioning Ivanov and Cryptex—a virtual currency exchange registered in St. Vincent and the Grenadines and operating in Russia. The FinCEN and OFAC actions are being issued in conjunction with actions by other U.S. government agencies and international law enforcement partners to hold accountable Ivanov and the associated virtual currency services. FinCEN's notice will be effective when published in the Federal Register

According to Treasury, the U.S. Secret Service’s Cyber Investigative Section, the Netherlands Police, and the Dutch Fiscal Intelligence and Investigation Service (FIOD) have seized web domains and/or infrastructure associated with PM2BTC, UAPS, and Cryptex. The U.S. Department of State has issued a reward offer up to $10 million through its Transnational Organized Crime Rewards Program for information leading to the arrest and/or conviction of Ivanov. Lastly, the U.S. Secret Service and the U.S. Attorney’s Office for the Eastern District of Virginia are unsealing an indictment of Ivanov and another Russian national, Timur Shakhmametov. These actions by U.S. and Dutch agencies were taken in partnership with Operation Endgame, a multinational coordinated cyber operation with European partners, to dismantle financial enablers of transnational organized cybercrime.

For identification information on Ivanov and Cryptex, see BankersOnline’s September 26, 2024, OFAC Update.

FinCEN has announced it has published a notice in the Federal Register today at 89 FR 79184 withdrawing its finding that ABLV Bank, AS is a financial institution of primary money laundering concern, as well as the related notice of proposed rulemaking seeking to impose special measure five pursuant to section 311 of the USA PATRIOT Act.

On February 16, 2018, FinCEN issued an NPRM that set forth FinCEN’s findings of money laundering concern regarding ABLV, a commercial bank located in Riga, Latvia, and proposed imposing special measure five under section 311, prohibiting covered financial institutions from opening or maintaining in the United States correspondent accounts for, or on behalf of, ABLV.

According to FinCEN, material subsequent developments since the issuance of the NPRM have mitigated the money laundering risks associated with ABLV. Shortly after the issuance of the NPRM, the European Central Bank (ECB) determined that ABLV—as well as its subsidiary, ABLV Bank Luxembourg—was failing or likely to fail. The ECB subsequently withdrew ABLV’s banking license, and the Luxembourg subsidiary was ordered dissolved. Thus, ABLV no longer operates as a depository institution. The bank is in the advanced stage of an irrevocable liquidation process supervised by the Government of Latvia, which ensures anti-money laundering/countering terrorist financing compliance. Furthermore, Latvian authorities have undertaken significant efforts to identify and address past illicit activity facilitated by the bank, resulting in criminal charges against owners of the bank and its senior managers. As a result, FinCEN has determined that ABLV is no longer a financial institution of primary money laundering concern.

The Securities and Exchange Commission yesterday reported settled charges against 23 entities and individuals for failures to timely report information about their holdings and transactions in public company stock. Two public companies were also charged for contributing to filing failures by their officers and directors and failing to report their insiders’ filing delinquencies as required.

The charges announced yesterday stem from SEC enforcement initiatives focused on Schedules 13D and 13G reports and Forms 3, 4, and 5 that certain corporate insiders are required to file. Schedules 13D and 13G provide information about the holdings and intentions of investors who beneficially own more than five percent of any registered voting class of public company stock. Forms 3, 4, and 5 are reports used to provide information about public company stock transactions by corporate officers, directors, or certain investors who beneficially own more than 10 percent of the stock.

Without admitting or denying the findings, all of the entities and individuals agreed to cease and desist from committing and causing violations of the respective charged provisions and to pay civil penalties.

The Treasury Department yesterday issued two announcements of OFAC sanctions activity.

OFAC has sanctioned two Haitian individuals: a former member of Haiti’s parliament, Prophane Victor, for his role in forming, supporting, and arming gangs and their members that have committed serious human rights abuse in Haiti; and Luckson Elan, the current leader of the Gran Grif gang, for his involvement in serious human rights abuse related to gang activity in Haiti’s Artibonite department.

OFAC has also sanctioned one individual and more than a dozen entities and vessels for their involvement in the shipment of Iranian crude oil and liquid petroleum gas to Syria and East Asia on behalf of the Islamic Revolutionary Guard Corps-Qods Force (IRGC-QF) and Hizballah.

For the names and identification information of the designated individuals, entities and vessels involved in the two OFAC actions, see yesterday’s BankersOnline OFAC Update.

The Federal Housing Finance Agency has announced it has revised the Agency's proposal to amend the Suspended Counterparty Program (SCP). The SCP regulation requires a regulated entity to report to FHFA if an individual or institution that it does business with has committed certain types of misconduct within the prior three years. It also authorizes FHFA to order its regulated entities to cease doing business or refrain from entering into new business with certain counterparties. Final suspension orders are published on FHFA’s website.

FHFA is publishing this re-proposal after considering issues that commenters had raised about the original proposed rule, issued in July 2023. This includes distinguishing between misconduct that poses material risk to the safety and soundness of the regulated entities from behavior with de minimis impact.

Specifically, the re-proposal would:

• Authorize the suspension of business between a regulated entity and a counterparty whose misconduct resulted in a federal prohibition order or a civil money penalty above a specific threshold; and
• Authorize the suspension of business between a regulated entity and a counterparty that has committed criminal or civil misconduct related to the management or ownership of real property.

Comments on the re-proposed rule will be accepted for 60 days following its publication in the Federal Register.

Publication and comment period update: Published 10/1/2024 at 89 FR 79785 in the Federal Register, with a comment period of 62 days, ending 12/02/2024