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The Treasury Department yesterday reported that OFAC had sanctioned nearly 50 entities and individuals that constitute multiple branches of a sprawling “shadow banking” network used by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Islamic Revolutionary Guard Corps (IRGC) to gain illicit access to the international financial system and process the equivalent of billions of dollars since 2020. MODAFL and the IRGC engage in several commercial revenue-generating activities, most notably the sale of Iranian oil and petrochemicals.

Networks of Iranian exchange houses and dozens of foreign cover companies under their control enable MODAFL and the IRGC to disguise the revenue they generate abroad that is then available to use for a range of MODAFL and IRGC activities, including the procurement and development of advanced weapons systems such as unmanned aerial vehicles. This revenue also supports the provision of weapons and funding to Iran’s regional proxy groups, including Yemen’s Houthis, who continue a campaign of reckless attacks on global shipping, as well as the transfer of UAVs to Russia for use in its war of aggression against Ukraine.

For the names and identification information of the designated parties, see the June 25, 2024, BankersOnline OFAC Update.

The Securities and Exchange Commission has announced it has updated its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 24 soliciting entities, six impersonators of genuine firms, and four bogus regulators.

The SEC’s list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being victims of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards and disclosure, reporting, and recordkeeping requirements.

In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus regulators who falsely claim to be government agencies or affiliates. Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.

Yesterday, the CFPB published a Bureau Blog article announcing the Bureau's approval of a new rule to address the current and future applications of complex algorithms and artificial intelligence used to estimate the value of a home. The new rule was approved last week by the OCC (and reportedly by the FDIC). The rule is to be jointly issued by the OCC, Federal Reserve Board, FDIC, NCUA, CFPB, and FHFA once approved by each of those agencies.

The Treasury Department reported on Friday that OFAC has designated twelve individuals in leadership roles at AO Kapersky Lab.

On Thursday, the Department of Commerce issued a final determination under Executive Order 13873 prohibiting Kaspersky Lab, Inc., its affiliates, subsidiaries and parent companies directly or indirectly from providing anti-virus software and cybersecurity products or services in the United States or to U.S. persons. Commerce reached this determination after an investigation found transactions involving the products and services of Kaspersky Lab, Inc. and its corporate family pose unacceptable risk to U.S. national security or the safety and security of U.S. persons, as outlined in E.O. 13873.

In addition, the Department of Commerce has designated AO Kaspersky Lab and OOO Kaspersky Group (Russia), and Kaspersky Labs Limited (United Kingdom) on the Entity List for their cooperation with Russian military and intelligence authorities in support of the Russian government’s cyber intelligence objectives. These activities are contrary to U.S. national security and foreign policy interests.

For the names and identification information of the designated parties, see the June 21, 2024, BankersOnline OFAC Update.

The FDIC has announced that its Board has approved the creation of two new, independent offices, reporting directly to the Board of Directors, to handle claims of sexual harassment, discrimination, and other forms of interpersonal misconduct, as well as claims of retaliation.

The FDIC’s new Office of Professional Conduct (OPC) will intake, investigate, and report on complaints of harassment and interpersonal misconduct, and will determine and enforce discipline against anyone violating the FDIC’s anti-harassment or anti-retaliation policies.

The FDIC’s new Office of Equal Employment Opportunity (OEEO) will intake, investigate, and report complaints of discrimination under the laws enforced by the Equal Employment Opportunity Commission.

The FDIC Board adopted these fundamental structural changes to the agency’s current framework for handling claims of harassment, discrimination, other interpersonal misconduct, and retaliation following feedback from FDIC employees, as well as recommendations in an independent third-party review of the agency’s workplace culture. The new offices approved will have separate functions because each must operate under distinct sets of law and policy.

The work of the OPC will be driven by the FDIC’s Anti-Harassment Program Directive and will serve as a single point of entry for employee complaints of harassment and other interpersonal misconduct. The OEEO will operate under several statutes enforced by the Equal Employment Opportunity Commission by serving as a single point of entry for employment discrimination claims.

Under the FDIC’s new structure, the OPC and the OEEO will be led by new corporate officers, appointed by the Board, who will report directly to the FDIC Board of Directors.

The FDIC has issued FIL-35-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Oklahoma — Blaine, Caddo, Custer, Delaware, Jackson, Mayes, Muskogee, and Rogers Counties — affected by severe storms, straight-line winds, tornadoes, and flooding from May 19, 2024, to May 28, 2024.

The FDIC and Federal Reserve Board have jointly announced that, following their joint review of the July 2023 resolution plan submissions of the eight largest and most complex banks, they identified a weakness in the plans from Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase. The agencies did not identify any weaknesses in the plans from the other banks.

The agencies jointly identified a weakness in the 2023 plan submitted by Citigroup, but reached different conclusions on its severity. The FDIC determined that the Citigroup plan is not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code and considers the weakness to be a "deficiency." A deficiency is a weakness that could undermine the feasibility of the plan. The Board concluded that the weakness is only a shortcoming. Under the resolution planning rule of the agencies, when one agency finds a shortcoming in a resolution plan and the other agency finds a deficiency, the plan is deemed to have a shortcoming. As a result, Citigroup's 2023 plan is considered to have a shortcoming. The agencies also previously identified a shortcoming in Citigroup's 2021 plan related to data quality and data management, and that shortcoming remains outstanding.

The agencies provided feedback letters to each of the eight banks that identify areas for continued development of banks' resolution strategies and capabilities. For the four banks with an identified shortcoming, the letters describe the specific weaknesses resulting in the shortcoming and the remedial actions required by the agencies. The shortcomings are to be addressed in the next resolution plans due by July 1, 2025. The feedback letters also specify that each bank, in its 2025 resolution plan submission, should address the topics of contingency planning and obtaining foreign government actions necessary to execute the resolution strategy.

2023 Resolution Plan Feedback Letters:

• Bank of America Corporation
• Bank of New York Mellon Corporation
• Citigroup Inc.
• The Goldman Sachs Group
• JPMorgan Chase & Co.
• Morgan Stanley
• State Street Corporation
• Wells Fargo & Company

Yesterday, the IRS announced it has issued Notice 2024-55, which provides guidance on exceptions to the additional tax when taking early permissible retirement plan distributions for emergency personal expenses and for victims of domestic abuse.

The notice also provides guidance to applicable eligible retirement plans on the plan requirements relating to emergency personal expense distributions and domestic abuse victim distributions, including that it is optional for a plan to permit these types of distributions.

In addition, the notice provides that the Department of the Treasury and the IRS anticipate issuing regulations on the 10% additional tax (including the exceptions to the 10% additional tax) and request comments relating to the notice. Comments are specifically requested on repayments of certain distributions permitted under section 72(t)(2).

Yesterday, Treasury Secretary Janet L. Yellen announced that OFAC had sanctioned eight Mexico-based targets affiliated with La Nueva Familia Michoacana drug cartel for trafficking fentanyl, cocaine, and methamphetamine into the United States. In addition to narcotics trafficking, La Nueva Familia Michoacana smuggles migrants from Mexico into the United States.

Concurrently, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Supplemental Advisory to highlight critical new information to help U.S. banks and other financial institutions guard against activity associated with the illicit fentanyl supply chain. The advisory includes new trends and red flags that can be indicators of activity associated with the procurement of precursor chemicals and manufacturing equipment used for the synthesis of illicit fentanyl and other synthetic opioids. Reporting from financial institutions of suspected financial transactions involving illicit fentanyl and narcotics trafficking plays a key role in law enforcement investigations and Treasury’s sanctions efforts globally.

For the names and identification information of the designated parties, see the June 20, 2024, BankersOnline OFAC Update.

FinCEN has issued a FIN-2024-A002) to alert U.S. financial institutions to new trends in the illicit fentanyl supply chain and urge vigilance in identifying and reporting suspicious activity associated with Mexico-based transnational criminal organizations and their illicit procurement of fentanyl precursor chemicals and manufacturing equipment from People’s Republic of China-based suppliers. The supplemental advisory builds off FinCEN’s 2019 advisory with new typologies and red flags to identify and report suspicious transactions, and fulfills the requirement in Section 3202 of the recently enacted FEND Off Fentanyl Act.

• FinCEN news release
• Treasury Department news release
• Remarks by Treasury Secretary Janet L. Yellen