Top Story Compliance Related

The CFPB this morning announced it is has finalized a rule to supervise the largest nonbank companies offering digital funds transfer and payment wallet apps. The rule will help the CFPB to ensure that these companies – specifically those handling more than 50 million transactions per year – follow federal law just like large banks, credit unions, and other financial institutions already supervised by the CFPB. The CFPB estimates that the most widely used apps covered by the rule collectively process over 13 billion consumer payment transactions annually.

The final rule will enable to the CFPB to supervise companies in key areas including:

• Privacy and Surveillance: Large technology companies are collecting vast quantities of data about an individual’s transactions. Federal law allows consumers to opt-out of certain data collection and sharing practices, and also prohibits misrepresentations about data protection practices.
• Errors and Fraud: Under longstanding federal law, consumers have the right to dispute transactions that are incorrect or fraudulent, and financial institutions must take steps to look into them. The CFPB is particularly concerned about how digital payment apps can be used to defraud older adults and active duty servicemembers. Some popular payment apps appear to design their systems to shift disputes to banks, credit unions, and credit card companies, rather than managing them on their own.
• Debanking: Given the volume of payments consumers make through many popular payment apps, consumers can face serious harms when they lose access to their app without notice or when their ability to make or receive payments is disrupted. Consumers have reported concerns to the CFPB about disruptions to their lives due to closures or freezes.

While the CFPB has always had enforcement authority over these companies, today's rule gives the CFPB the authority to conduct proactive examinations to ensure companies are complying with the law in these and other areas.

In the final rule, the CFPB made several significant changes from its initial proposal. The transaction threshold determining which companies require supervision is now substantially higher, at 50 million annual transactions. Given the evolving market for digital currencies, the CFPB also limited the rule's scope to count only transactions conducted in U.S. dollars. The rule, which amends 12 C.F.R. part 1090, will be effective 30 days after publication in the Federal Register.

The FDIC has made its November 2024 updates to its Risk Management Manual of Examination Policies (RMS Manual). The Manual provides FDIC examiners information relating to examination activities and supervisory practices. The FDIC conducts examinations at financial institutions to ensure public confidence in the banking system and to protect the Deposit Insurance Fund. The Manual promotes consistency in examination activities, which center on evaluating an institution’s capital, assets, management, earnings, liquidity, sensitivity to market risk, and adherence to laws and regulations.

This month's updates are found in Section 22.1 — Examination Documentation Modules. The FDIC has added 25 Reference ED Modules to this section.

OFAC has issued a Penalty Notice imposing a $1,104,408 penalty on a natural U.S. person for 75 violations of OFAC sanctions on Iran valued at approximately $561,802.

Between 2019 and 2022, the individual executed a plan to purchase, renovate, and operate a hotel in Iran. In furtherance of this scheme, this individual used foreign money services businesses in Iran and Canada to evade U.S. sanctions, while aware at all times of U.S. sanctions on Iran. The penalty amount reflects OFAC’s determination that the violations were egregious and were not voluntarily self-disclosed.

Yesterday, the Treasury Department reported that OFAC sanctioned a network of nine Mexican nationals involved in fentanyl, heroin, and other deadly drug trafficking and money laundering. Individuals designated in this network also engage in human smuggling in furtherance of their drug trafficking activities. Additionally, as members of the Cartel Jalisco Nueva Generacion (CJNG), some of the individuals sanctioned today played a prominent role in the early stages of the U.S. opioid crisis, a leading factor driving the United States’ modern fentanyl crisis. CJNG is a violent Mexico-based drug trafficking organization responsible for a significant proportion of fentanyl and other deadly drugs trafficked into the United States.

Treasury also reported that OFAC designated six senior Hamas officials, including the terrorist group’s representatives abroad, a senior member of the Hamas military wing, the Izz Al-Din Al-Qassam Brigades, as well as individuals involved in supporting the terrorist group’s fundraising efforts and weapons smuggling into Gaza.

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

The FDIC has issued FIL-81-2024 and a press release to announce an extension of the comment period for the proposed rule on Custodial Deposit Accounts with Transactional Features and Prompt Payment of Deposit Insurance to Depositors from December 2, 2024, to January 16, 2025.

Publication update: Published at 89 FR 91586 on 11/20/2024.

Yesterday, the Treasury Department reported that OFAC was sanctioning Amana the Settlement Movement of Gush Emunim Central Cooperative Association Ltd (Amana), a settlement development organization that is involved with U.S.-sanctioned individuals and outposts that perpetrate violence in the West Bank, and its subsidiary Binyanei Bar Amana Ltd. Concurrently, the Department of State was designating three individuals and one entity.

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

The CFPB has published its Personal Financial Data Rights Rule at 89 FR 90838 in this morning's Federal Register.

Subject to the outcome of pending litigation against the rule, it will become final on January 17, 2025, with compliance dates for data providers beginning April 1, 2026; April 1, 2027; April 1, 2028; April 1, 2029; or April 1, 2030, based on the criteria set forth in § 1033.121(c).

The FDIC has issued FIL-80-2024, Guidance to Help Financial Institutions and Facilitate Recovery in Areas for Montana Affected by a Severe Storm and Straight-line Winds on August 6, 2024. The affected area in the Crow Indian Reservation.

FinCEN has updated two FAQs related to access to Beneficial Ownership Information. The topics covered are in Section O (Access FAQs), and include FAQ O1 (Access to BOI for authorized recipients) and FAQ O2 (Access to BOI for Federal agencies).

FAQ O1 indicates that access is being offered in five phases. The first four phases will extend the opportunity to request access to Federal and State, local, and Tribal law enforcement partners. The fifth phase, expected to begin in the spring of 2025, will extend the opportunity to request access to financial institutions subject to due diligence requirements under applicable law and their supervisors.

The Federal Trade Commission has announced it has filed a complaint against Seek Capital and its founder and CEO, Roy Ferman, for operating a bogus business finance scheme that cost small business owners more than $37 million.

According to the complaint, the company has targeted new and aspiring small business owners looking for loans or lines of credit to open or grow their businesses. While the company’s advertising implies that business owners would have access to cash, instead Seek charges clients thousands of dollars simply to open credit cards in the owners’ names.