Top Story Compliance Related

The CFPB has reported that the Bureau and the Justice Department (DOJ) yesterday took action to end Fairway Independent Mortgage Corporation’s illegal mortgage lending discrimination against majority-Black neighborhoods in the greater Birmingham, Alabama, area. The CFPB and DOJ allege that Fairway illegally redlined Black neighborhoods, including through its marketing and sales actions. Fairway’s actions discouraged people from applying for mortgage loans in the Birmingham metropolitan area’s Black neighborhoods. If entered by the court, the settlement announced yesterday would require Fairway to pay a $1.9 million civil penalty to the CFPB’s victims relief fund. Fairway would also be required to provide $7 million for a loan subsidy program to offer affordable home purchase, refinance, and home improvement loans in majority-Black neighborhoods, and pay at least $1 million to serve neighborhoods it redlined.

• Complaint

The Federal Deposit Insurance Corporation, the Federal Reserve Board, the Florida Office of Financial Regulation, the National Credit Union Administration, and the Office of the Comptroller of the Currency have issued a statement on supervisory practices regarding financial institutions affected by Hurricane Milton. The agencies recognize the serious impact of Hurricane Milton on the customers and operations of many financial institutions and will provide appropriate regulatory assistance to affected institutions subject to their supervision. The agencies encourage institutions operating in the affected areas to meet the financial services needs of their communities.

The agencies' statement addresses particularly the areas of lending, temporary facilities, publishing requirements, and regulatory reporting requirements.

Yesterday, the Treasury Department announced that OFAC, in a joint action with Canada, designated the Samidoun Palestinian Prisoner Solidarity Network, or “Samidoun,” a sham charity that serves as an international fundraiser for the Popular Front for the Liberation of Palestine (PFLP) terrorist organization. Also designated was Khaled Barakat, a member of the PFLP’s leadership. Together, Samidoun and Barakat play critical roles in external fundraising for the PFLP.

For identification information on Samidoun and Barakat, see BankersOnline’s October 15, 2024, OFAC Update.

The CFPB has posted its beta release of the HMDA Platform for data that will be collected in 2025. The 2025 Beta Platform provides financial institutions and vendors an opportunity to test whether their sample loan/application register (LAR) data comply with the reporting requirements outlined in the Filing Instructions Guide for HMDA data collected in 2025.

The Beta Platform can be accessed at https://ffiec.beta.cfpb.gov/filing/. Log in and select 2025 from the dropdown to start testing. Financial institutions can use their log-in credentials from the previous filing periods or, if they have not previously filed data, establish log-in credentials and upload sample 2025 HMDA files to perform validation on their data. Use of this platform (and compliance with HMDA) requires financial institutions to have a Legal Entity Identifier (LEI) which uniquely identifies the institution, and that LEI must be recognized by the HMDA Platform. If your institution has not registered for an LEI and intends to file HMDA data, visit the Global LEI Foundation for information on obtaining an LEI.

NCUA Chairman Todd Harper has commented on the U.S. Department of Justice’s recent settlement with Citadel Federal Credit Union to resolve lending discrimination allegations. Citadel is a $6 billion financial institution in Southeastern Pennsylvania.

“The Justice Department’s settlement with Citadel Federal Credit Union is significant. It signals that federal credit unions must follow fair lending laws. It signals to all communities that discrimination through redlining will not be tolerated. And, it brings communities who have been discriminated against a step closer to an equitable opportunity to access safe, fair, and affordable financial services and to closing the wealth gap.

“The NCUA maintains a strong relationship with the Justice Department’s Civil Rights Division and the department’s Combating Redlining Initiative, which investigates potential fair lending violations and helps to end discriminatory lending practices. That productive relationship will continue through our fair lending examination and referral process."

The October 10 press release from the Justice Department said that Citadel has agreed to pay over $6.5 million to resolve allegations that it engaged in a pattern or practice of lending discrimination by redlining predominantly Black and Hispanic neighborhoods in and around Philadelphia. This agreement is the Justice Department’s first redlining settlement with a credit union, making it a historic achievement for the department's Combating Redlining Initiative.

On Friday, the Treasury Department reported that in response to Iran's October 1 attack on Israel, the U.S. is expanding sanctions on Iran’s petroleum and petrochemical sectors, to intensify financial pressure on Iran, limiting the regime’s ability to earn critical energy revenues to undermine stability in the region and attack U.S. partners and allies. The Secretary of the Treasury, in consultation with the Secretary of State, has identified the petroleum and petrochemical sectors of the Iranian economy under authority of Executive Order (E.O.) 13902, which allows Treasury to target a broader range of activities relating to Iran’s trade in petroleum and petrochemical products. E.O. 13902 provides authority to identify and impose sanctions on key sectors of Iran’s economy to deny the Iranian government financial resources that may be used to fund and support its nuclear program, missile development, terrorism and terrorist proxy networks, and malign regional influence.

OFAC also designated 10 entities in multiple jurisdictions and identified 17 vessels as blocked property, under E.O. 13846, for their involvement in shipments of Iranian petroleum and petrochemical products in support of the U.S.-designated National Iranian Oil Company (NIOC) and Triliance Petrochemical Co. Limited (Triliance). The U.S. Department of State also designated six entities and identified six vessels as blocked property pursuant to E.O. 13846 for knowingly engaging in a significant transaction for the purchase, acquisition, sale, transport, or marketing of petroleum or petroleum products from Iran.

For the names and identifying information of the designated entities and vessels, and a link to the Treasury Secretary's determination document, see Friday's BankersOnline OFAC Summary.

The FDIC has posted an agenda for its next Board of Directors meeting, to be held at 10 a.m. on October 17, 2024.

The meeting will be open to the public for observation via webcast.

The current agenda lists the following items for consideration at the meeting:

• Briefing: Semi-annual Update on the Deposit Insurance Fund Restoration Plan
• Designated Reserve Ratio for 2025
• Delay of Compliance Date for [Certain] [Subpart A] Amendments to FDIC Official Sign and Advertising Rule
• Minutes of a previous Board meeting

FinCEN has published [89 FR 82499] in today's Federal Register an order issued under authority from the Combating Russian Money Laundering Act to prohibit certain transmittals of funds by any covered financial institution involving PM2BTC, a financial institution operating outside of the United States determined to be of a primary money laundering concern in connection with Russian illicit finance.

The order became effective on publication.

Yesterday, the CFPB announced its has banned private dispute resolution platform Ejudicate from arbitrating disputes about consumer financial products after the company misled student borrowers about its neutrality and initiated sham arbitration proceedings. Ejudicate initiated those proceedings for the company Prehired, which was permanently shut down in 2023 by the CFPB and several state attorneys general for its illegal lending practices. Ejudicate acted as a service provider to Prehired by providing these sham arbitration services. The CFPB found that Ejudicate treated borrowers unfairly and was not truthful about its role while hiding that its financial interests were aligned with Prehired.

The OCC, Federal Reserve Board, Department of Justice and FinCEN have announced coordinated actions against Toronto-Dominion Bank, TD Bank US Holding Company, TD Bank, N.A., and TD Bank USA, N.A. for deficiencies in the bank’s Bank Secrecy Act (BSA) and anti-money laundering (AML) compliance program. Yesterday’s actions also impose a restriction on the growth of the bank and a measure designed to ensure that the bank invests sufficient resources to remediate its BSA/AML deficiencies in a timely manner.

The regulators and the Justice Department found that the bank failed to develop and maintain a BSA/AML program reasonably designed to assure and monitor compliance with the BSA and its implementing regulations. Deficiencies in the bank’s BSA/AML program included those related to internal controls and risk management practices; risk assessments; customer due diligence; customer risk ratings; suspicious activity identification, evaluation, and reporting; governance; staffing; independent testing; and training, among others.

The OCC also found that the bank had significant, systemic breakdowns in its transaction monitoring program. The bank processed hundreds of millions of dollars of transactions with clear indicia of highly suspicious activity, creating a potential for significant money laundering, terrorist financing, or other illicit financial transactions. The bank repeatedly failed to take appropriate and timely corrective action to address the highly suspicious activity and failed to properly emphasize BSA/AML compliance.

The bank had a systemic breakdown in its processes to identify and report suspicious activity, and a pattern or practice of noncompliance with the suspicious activity report filing requirement, resulting in numerous violations. The bank also violated currency transaction reporting requirements on numerous occasions.

• The OCC imposed a $450 million civil money penalty and imposed a limit on asset growth on TD Bank, N.A. and TD Bank USA, N.A.
• FinCEN imposed a $1.3 billion penalty and a four-year monitoring requirement.
• The Federal Reserve Board reported it has fined Toronto-Dominion Bank $123.5 million and imposed enhanced measures to comply with anti-money laundering laws and to correct its risk management deficiencies.
• The Department of Justice announced that TD Bank N.A., and its parent company TD Bank US Holding Company pleaded guilty and agreed to pay over $1.8 billion in penalties.

For additional information see "TD Bank to pay $3 billion and restrict growth for BSA/AML deficiencies," in the BankersOnline Penalties pages.