Top Story Compliance Related

Yesterday, FinCEN released a supplemental alert (FIN-2024-Alert002), highlighting five additional red flags regarding the financing of Israeli extremist settler violence against Palestinians in the West Bank.

FinCEN issued an alert (FIN-2024-Alert001) on February 1, 2024, to financial institutions related to the financing of Israeli extremist settler violence against Palestinians in the West Bank. This supplemental alert provides additional red flags to assist U.S. financial institutions in identifying and reporting suspicious activity related to the financing of this violence. Additionally, this alert requests that financial institutions continue to use the existing SAR code (FIN-2024-WBEXTREMISM) when submitting SARs specific to the financing of Israeli extremist settler violence in the West Bank and reminds financial institutions of their Bank Secrecy Act (BSA) reporting obligations.

Yesterday, the U.S. Department of State reported it has imposed sanctions on three individuals and five entities under Executive Order 14115 for being involved in violence or threats of violence targeting civilians, seizure or dispossession of property by private actors, or actions that threaten the peace, stability and security of the West Bank; or being owned or controlled by an individual designated under that order.

For the names and identification information of the designated parties, see this July 11, 2024, BankersOnline OFAC Update.

The OCC has announced it has issued an amendment to its October 7, 2020, cease and desist order against Citibank, N.A., Sioux Falls, South Dakota, related to deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls.

The amendment is based on the bank’s failure to meet remediation milestones and make sufficient and sustainable progress towards compliance with the 2020 Order. It was issued to ensure Citibank prioritizes the remediation work, including through the allocation of sufficient resources. The OCC also assessed a $75 million civil money penalty against Citibank based on the bank’s violations of the 2020 Order and lack of processes to monitor the impact of data quality concerns on regulatory reporting.

The Federal Reserve Board announced a separate but related action against Citigroup, the bank's holding company, assessing a $60.6 million civil money penalty for violating the Board's October 2020 enforcement action

The FDIC has updated section 3.2 (Loans) of its Risk Manual of Examination Policies. The discussion related to the issuance of “Express Determination” letters has been updated to reflect current accounting guidance regarding the allowance for credit losses on loans and leases and procedures related to examinations conducted under the FDIC’s continuous examination program. Additional updates include the concurrent deletion of the “Troubled Commercial Real Estate Loan Classification Guidelines” and update to the “Commercial Real Estate Loans” sections.

The CFPB yesterday announced proposed new rules to make it easier for homeowners to get help when they are struggling to pay their mortgage. The proposed amendments to Regulation X, if finalized, would require mortgage servicers to focus on helping borrowers, not foreclosing, when a homeowner asks for help. The proposed changes would also make it simpler for servicers to offer assistance by reducing paperwork requirements, improve communication with borrowers, and ensure critical information is provided in languages borrowers understand. The CFPB is requesting comment about several other topics, including possible approaches it could take to ensure servicers are furnishing accurate and consistent credit reporting information for borrowers undergoing review for assistance.

• Proposed rule
• Unofficial redline of the proposed Regulation X amendments
• Fast Facts about the proposal

The current regulations governing mortgage servicing took effect in 2014. The rules have rigid timing and other requirements that servicers must follow in all cases. The rules also rely on borrowers submitting all their documents before the servicer begins its review or pauses foreclosure proceedings. In 2022, the CFPB asked the public for input on improving protections for borrowers facing financial hardships. The CFPB heard from both the mortgage industry and borrower advocates that a simpler, more flexible approach to mortgage assistance would be helpful.

Yesterday's proposal, if finalized, would—

• Stop dual tracking and limit fees: The proposed rule would require servicers to try to help borrowers first, before foreclosing, when they request assistance. Servicers would generally only be allowed to move ahead with foreclosure after all possibilities for assistance are exhausted or the borrower has stopped communicating with the servicer. The proposal would also limit the fees a servicer can charge a borrower while the servicer is reviewing possible options to help the borrower.
• Reduce delays by streamlining paperwork requirements: Currently, a servicer cannot evaluate whether a borrower is eligible for assistance without a “complete application” that includes all information needed to assess eligibility for all available options. This can delay assistance offers, hurting both homeowners and servicers. Under the proposal, servicers would have more flexibility to review borrowers for each option individually, potentially enabling quicker assistance.
• Improve borrower-servicer communications: The proposed rule would require servicers to provide more tailored notices to borrowers, so they know what actions they can take if they want to. This includes changing the notices that borrowers get shortly after missing a payment to include information about who the loan investor is and how to get information about available assistance.
• Ensure borrowers receive critical information in languages they understand: Under the proposal, borrowers who received marketing materials in another language could request mortgage assistance communications in that same language. The proposed rule would also require servicers to provide the improved notices in both English and Spanish to all borrowers, as well as make available oral interpretation services in telephone calls with borrowers.

The new provisions would not apply to small servicers. All existing requirements remain in effect until the effective date of a final rule. Comments must be received by September 9, 2024. PUBLICATION UPDATE: Published at 89 FR 60204 in the July 24, 2024, Federal Register.

The CFPB yesterday announced it has taken action against repeat offender Fifth Third Bank for a range of illegal activities that would result in the bank paying $20 million in penalties in addition to paying redress to approximately 35,000 harmed consumers, including about 1,000 who had their cars repossessed. Specifically, the CFPB is ordering Fifth Third Bank to pay a $5 million penalty for forcing vehicle insurance onto borrowers who had coverage. The CFPB also filed a proposed court order that would require Fifth Third Bank to pay a $15 million penalty for opening fake accounts in the names of its customers. The proposed court order bans Fifth Third Bank from setting employee sales goals that incentivize fraudulently opening accounts.

For further information on yesterday's CFPB actions against Fifth Third, see BankersOnline's Penalty page.

In 2015, the CFPB took two actions against the bank – one for discriminatory auto loan pricing, which was a joint CFPB and U.S. Department of Justice action, and the other for illegal credit card practices. For the discriminatory auto loan pricing action, Fifth Third Bank was ordered to pay $18 million to harmed Black and Hispanic borrowers. For the illegal credit card practices, the bank was ordered to pay $3 million to harmed consumers and a $500,000 penalty.

The Federal Reserve Board's archive of evaluations of member banks' Community Reinvestment Act compliance includes 15 evaluations made public by the Reserve Banks in June 2024, all of which carried Satisfactory ratings.

FinCEN has updated its Beneficial Ownership Information Frequently Asked Questions, adding three new Reporting Company questions (questions C.12 – C.14), and one new Beneficial Owner question (question D.17).

In related news, FinCEN has posted an alert on its Beneficial Ownership Information webpage concerning fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act.

The FDIC has issued a list of 64 banks examined for compliance with the Community Reinvestment Act who were assigned evaluation ratings in April 2024. Four of those banks — The Peoples Bank, Gambier, Ohio; Union Bank, Lake Odessa, Michigan; Bank of Crocker, Waynesville, Missouri; and Forbright Bank, Potomac, Maryland — were rated "Needs to Improve." Fifty-eight banks received "Satisfactory" ratings.

We congratulate two banks — Bank of Charles Town, Charles Town, West Virginia, and UBS Bank USA, Salt Lake City, Utah — who received ratings of "Outstanding."

OFAC has issued OFAC Guidance: Production Submission Standards, updating its former delivery standards. The new document provides technical and general guidance to persons submitting material to OFAC and applies primarily to persons providing responses to administrative subpoenas, requests for information, disclosures, and especially for submissions that may entail voluminous documentation (e.g., more than 100 pages).