Top Story Compliance Related

The Federal Trade Commission has taken action against software maker Adobe and two of its executives — Maninder Sawhney and David Wadhwani — for deceiving consumers by hiding the early termination fee for its most popular subscription plan and making it difficult for consumers to cancel subscriptions.

A federal court complaint filed by the Department of Justice upon notification and referral from the FTC charges that Adobe pushed consumers toward the “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars. Wadhwani is the president of Adobe’s digital media business, and Sawhney is an Adobe vice president.

According to the complaint, when consumers purchase a subscription through the company’s website, Adobe pushes consumers to its “annual paid monthly” subscription plan, pre-selecting it as a default. Adobe prominently shows the plan’s “monthly” cost during enrollment, but it buries the early termination fee (ETF) and its amount, which is 50 percent of the remaining monthly payments when a consumer cancels in their first year. Adobe’s ETF disclosures are buried on the company’s website in small print or require consumers to hover over small icons to find the disclosures.

In addition to failing to disclose the ETF to consumers when they subscribe, the complaint also alleges that Adobe uses the ETF to ambush consumers to deter them from cancelling their subscriptions. The complaint also alleges that Adobe’s cancellation processes are designed to make cancellation difficult for consumers. When consumers have attempted to cancel their subscription on the company’s website, they have been forced to navigate numerous pages in order to cancel.

When consumers reach out to Adobe’s customer service to cancel, they encounter resistance and delay from Adobe representatives. Consumers also experience other obstacles, such as dropped calls and chats, and multiple transfers. Some consumers who thought they had successfully cancelled their subscription reported that the company continued to charge them until discovering the charges on their credit card statements.

The complaint charges that Adobe’s practices violate the Restore Online Shoppers’ Confidence Act.

• Press release

The Federal Reserve Board on Friday announced its issuance of a Consent Cease and Desist Order against Evolve Bancorp, Inc., and Evolve Bank & Trust, both of West Memphis, Arkansas, for deficiencies in the bank's anti-money laundering, risk management, and consumer compliance programs.

Evolve partners with various financial technology companies that, in turn, provide access to banking products and services to their end customers. Examinations conducted in 2023 found that Evolve engaged in unsafe and unsound banking practices by failing to have in place an effective risk management framework for those partnerships. In addition, Evolve did not maintain an effective risk management program or controls sufficient to comply with anti-money laundering laws and laws protecting consumers.

The Board is requiring the bank to improve its policies and programs in those areas, in addition to requiring other remedial improvements. For current partnerships with financial technology companies, the Board's action requires Evolve to strengthen its risk management practices to address potential risks, including compliance and fraud risks, by implementing appropriate oversight and monitoring of those relationships, including through enhanced procedures related to recordkeeping and consumer compliance programs. The Board's enforcement action against Evolve is independent of the bankruptcy proceedings regarding Synapse Financial Technologies, Inc.

The Board's action was taken in conjunction with the Arkansas State Bank Department, the state supervisor of Evolve.

On Friday, the Treasury Department reported that OFAC has imposed sanctions on four individuals with links to the Islamic State of Iraq and Syria (ISIS), including members of an ISIS-linked human smuggling network. The investigations into these targets, as well as their subsequent designations, were taken in close coordination with the Government of Türkiye. As a result of this close cooperation, the Government of Türkiye concurrently took its own domestic action against this network.

Also on Friday, the State Department announced its designation of Tzav 9, a violent extremist Israeli group that has been blocking, harassing, and damaging convoys carrying lifesaving humanitarian assistance to Palestinian civilians in Gaza.

For additional information on the sanctioned parties, see BankersOnline’s June 14, 2024, OFAC Update.

The Treasury Department on Wednesday announced it has issued sweeping new measures guided by G7 commitments to intensify the pressure on Russia for its continued cruel and unprovoked war against Ukraine. Yesterday’s actions ratchet up the risk of secondary sanctions for foreign financial institutions that deal with Russia’s war economy; restrict the ability of Russian military-industrial base to take advantage of certain U.S. software and information technology (IT) services; and, together with the Department of State, target more than 300 individuals and entities both in Russia and outside its borders—including in Asia, the Middle East, Europe, Africa, Central Asia, and the Caribbean—whose products and services enable Russia to sustain its war effort and evade sanctions.

To help clarify the risk foreign financial institutions face by conducting or facilitating significant transactions or providing any service involving Russia’s designated banks, OFAC has updated the Specially Designated Nationals and Blocked Persons List (SDN List) information for five sanctioned Russian financial institutions, to include the addresses and aliases of their foreign locations.

Specifically, OFAC has updated the listings for Promsvyazbank Public Joint Stock Company to include its locations in Beijing, People’s Republic of China (PRC), Bishkek, Kyrgyz Republic, and New Delhi, India; for State Corporation Bank for Development and Foreign Economic Affairs Vnesheconombank to include its locations in Beijing, PRC and Mumbai, India; for Sberbank to include its locations in Beijing, PRC and New Delhi and Mumbai, India; for VTB to include its locations in New Delhi, India, and Beijing and Shanghai, PRC; and for VTB Capital Holdings Closed Joint Stock Company to include its location in Hong Kong, PRC.

For the names and identification information of the designated parties, and information on related OFAC actions, see the June 12, 2024, BankersOnline OFAC Update.

On June 11, the CFPB announced a proposed rule [published in the Federal Register at 89 FR 51682 on 6/18/2024] that would remove medical bills from most credit reports, increase privacy protections, help to increase credit scores and loan approvals, and prevent debt collectors from using the credit reporting system to coerce people to pay. The proposal would stop credit reporting companies from sharing medical debts with lenders and prohibit lenders from making lending decisions based on medical information. The proposed rule is part of the CFPB’s efforts to address the burden of medical debt and coercive credit reporting practices.

In 2003, Congress restricted lenders from obtaining or using medical information, including information about debts, through the Fair and Accurate Credit Transactions Act. However, federal agencies subsequently issued a special regulatory exception to allow creditors to use medical debts in their credit decisions. The CFPB is proposing to close the regulatory loophole that has kept vast amounts of medical debt information in the credit reporting system. The proposed rule would help ensure that medical information does not unjustly damage credit scores, and would help keep debt collectors from coercing payments for inaccurate or false medical bills.

Specifically, the proposed rule, if finalized would:

• Eliminate the special medical debt exception
• Establish guardrails for credit reporting companies
• Ban repossession of medical devices

Comments on the CFPB's proposal will be accepted through August 12, 2024. The CFPB proposes to make the final rule, when issued, effective 60 days after it is published in the Federal Register.

• Unofficial redline of the proposed rule amendments to Regulation V
• Fast Facts on the proposal

The OCC has issued Bulletin 2024-13 announcing version 2.0 of the "Retail Nondeposit Investment Products" booklet of the Comptroller's Handbook. This booklet discusses risks and risk management practices associated with the recommendation or sale of nondeposit investment products to retail customers. This booklet also provides examiners with a framework for evaluating a bank’s retail nondeposit investment product program.

The revised booklet replaces version 1.0 of the booklet with the same title issued January 2015. Also rescinded is OCC Bulletin 2015-2, “Retail Nondeposit Investment Products: Revised Comptroller's Handbook Booklet and Rescissions.”

The revised booklet—

• incorporates significant regulatory changes adopted in the U.S. Securities and Exchange Commission’s Regulation Best Interest that may relate to banks' securities activities
• reflects OCC and interagency issuances that have been published or rescinded since January 2015
• provides further clarity regarding sound risk management practices and guidance to examiners
• includes other minor updates for general clarity

On June 11, the Treasury Department announced that OFAC has sanctioned members of one of Guyana’s wealthiest families, Nazar Mohamed and his son, Azruddin Mohamed, their company, Mohamed’s Enterprise, and a Guyanese government official, Mae Thomas, for their roles in public corruption in Guyana. Additionally, OFAC designated two other entities, Hadi’s World and Team Mohamed’s Racing Team, for being owned or controlled by Mohamed’s Enterprise and Azruddin, respectively. These individuals and entities are sanctioned pursuant to Executive Order 13818, which builds upon and implements the Global Magnitsky Human Rights Accountability Act and targets perpetrators of serious human rights abuse and corruption around the world.

For the identification information of the designated parties, see the June 11, 2024, BankersOnline OFAC Update.

The Treasury Department yesterday reported that OFAC has sanctioned four individuals (including tanker captains), four entities, and two vessels in multiple jurisdictions that have engaged in the illicit transport of oil and other commodities, including for the network of Houthi financial facilitator Sa’id al-Jamal. This action targets maritime shipping and financial facilitators, several vessel managers and owners, and a company involved in forging shipping documents. This seventh round of sanctions targeting the network of Sa’id al-Jamal since October 2023 underscores the U.S. government’s commitment to isolating and disrupting the financing of international terrorist groups such as the Houthis.

For the names and identification information of the designated individuals, entities, and vessels, see the June 10, 2024, BankersOnline OFAC Update.

The Financial Crimes Enforcement Network (FinCEN) has updated its Beneficial Ownership Information Frequently Asked Questions about reporting companies and exemptions, beneficial owners, the reporting requirements, and general questions, including information about how the Corporate Transparency Act applies to Indian Tribes and entities formed under tribal law.

New FAQs have been added to Sections C (Reporting Company), D (Beneficial Owner), and L (Reporting Company Exemptions). Updated FAQs can be found in Sections A (General Questions), C (Reporting Company), and F (Reporting Requirements).

The Securities and Exchange Commission on Friday reported it had charged three New Yorkers with fraud for selling unregistered membership interests in LLCs that purported to invest in shares of pre-IPO companies, first on behalf of StraightPath Venture Partners LLC, the subject of the Commission’s emergency action in May 2022, and, later, on behalf of Legend Venture Partners LLC, the subject of the Commission’s emergency action in June 2023. Both StraightPath and Legend are now under court-ordered receiverships.

In this new action, the SEC alleges that New York residents Mario Gogliormella, Steven Lacaj, and Karim Ibrahim directed an unregistered sales force of more than 50 callers in boiler rooms to pressure investors into making investments without telling them that the shares had been substantially marked up—between approximately 19 and 105 percent on average above the prices that StraightPath or Legend had paid for the underlying shares. As a result of these tactics, the defendants and their sales force allegedly pocketed more than $45 million in fees from unsuspecting investors from 2019 to 2022.

The SEC’s complaint charges the defendants with violating antifraud and other provisions of the federal securities laws. The complaint seeks permanent injunctive relief, return of allegedly ill-gotten gains, and civil penalties. The SEC also charged Adam Ibrahim, Karim Ibrahim’s brother, as a relief defendant.

The U.S. Attorney’s Office for the Southern District of New York on Friday reported it has unsealed an indictment charging Gogliormella, Lacaj, and Karim Ibrahim with securities fraud, among other offenses, in connection with their work for StraightPath and Legend.