Top Story Compliance Related

FinCEN has announced it has joined a multi-sector national task force dedicated to the prevention of fraud and scams. The National Task Force on Fraud and Scam Prevention, convened by the Aspen Institute’s Financial Security Program, brings together key stakeholders including the financial services sector, technology companies, consumer advocacy groups, information sharing and analysis centers, and federal government agencies to develop a comprehensive national strategy for combating fraud and scams. Fraud and cybercrime (including fraudulent schemes) are two of FinCEN’s Anti-Money Laundering and Countering the Financing of Terrorism National Priorities.

As part of its role on the Task Force, FinCEN will participate in specific working groups that will develop recommendations to include in the Task Force’s national strategy to combat fraud through cross-sector collaboration and “whole-of-government” support.

The Securities and Exchange Commission today announced that broker-dealers Webull Financial LLC, Lightspeed Financial Services Group LLC, and Paulson Investment Company, LLC have agreed to settle charges that they filed with law enforcement suspicious activity reports (SARs) that failed to include important, required information. The three broker-dealers agreed to pay $275,000 combined in civil penalties to settle the SEC’s charges.

The SEC’s orders find that the broker-dealers violated Section 17(a) of the Exchange Act and SEC Rule 17a-8. Without admitting or denying the findings, the firms agreed to be censured, cease and desist from violating the charged provisions, and pay civil penalties. Further, Webull Financial LLC and Paulson Investment Company, LLC agreed to undertake a review of their anti-money-laundering programs by compliance consultants. The resolutions reflect each of the firms’ cooperation after being contacted by Commission staff, as well as certain remedial measures taken by Lightspeed.

• Webull Financial LLC, of New York, NY, agreed to pay a $125,000 civil penalty.
• Lightspeed Financial Services Group LLC, of Morristown, NJ, agreed to pay a $75,000 civil penalty.
• Paulson Investment Company, LLC, of Lake Oswego, OR, agreed to pay a $75,000 civil penalty.

The CFPB has issued a final rule making inflation adjustments to Regulation Z that impact HOEPA loans and Qualified Mortgages, where appropriate. For open-end consumer credit plans, the threshold that triggers requirements to disclose minimum interest charges will remain unchanged at $1.00 in 2025.

For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages in 2025 will be $26,968.

The adjusted points-and-fees dollar trigger for high-cost mortgages in 2025 will be $1,348.

For qualified mortgages (QMs) under the General QM loan definition in § 1026.43(e)(2), the thresholds for the spread between the annual percentage rate (APR) and the average prime offer rate (APOR) in 2025 will be: 2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $134,841; 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $80,905 but less than $134,841; 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $80,905.

For all categories of QMs, the thresholds for total points and fees in 2025 will be 3 percent of the total loan amount for a loan greater than or equal to $134,841; $4,045 for a loan amount greater than or equal to $80,905 but less than $134,841; 5 percent of the total loan amount for a loan greater than or equal to $26,968 but less than $80,905; $1,348 for a loan amount greater than or equal to $16,855 but less than $26,968; and 8 percent of the total loan amount for a loan amount less than $16,855.

The CFPB also announced the maximum amount consumer reporting agencies may charge consumers for making a file disclosure to a consumer under the Fair Credit Reporting Act (FCRA) will remain unchanged at $15.50, effective for 2025.

These amendments have been posted in the BankersOnline Regulations pages for sections 1026.32 and 1026.43 of Regulation Z and Appendix O to Regulation V.

The Treasury Department yesterday reported that OFAC has taken another major step in implementing commitments made by G7 leaders to curtail Russia’s use of the international financial system to further its war against Ukraine. OFAC’s action includes the designation of Gazprombank, more than 50 internationally connected Russian banks, more than 40 Russian securities registrars, and 15 Russian finance officials. OFAC is also issuing an alert describing sanctions risks related to Russia’s System for Transfer of Financial Messages (SPFS), which the Kremlin created and uses to evade sanctions.

For the names and identification information of all the designated parties, links to new and revised Russia-related General Licenses, FAQs and the Alert, see yesterday's BankersOnline OFAC Update.

The Office of the Comptroller of the Currency has released enforcement actions recently taken against financial institutions it supervises and individuals now or formerly associated with such financial institutions.

• A Cease and Desist Order against Clear Fork Bank, N.A., Albany, Texas, for violations of law and unsafe or unsound practices related to the Bank Secrecy Act (BSA)/anti-money laundering. The bank had failed to correct previously reported BSA problems.
• A Formal Agreement with Hiawatha National Bank, Hager City, Wisconsin, for unsafe or unsound practices, including those relating to liquidity oversight, annual credit review processes, loan risk ratings, independent loan review, and allowance for credit losses.
• Cease and Desist Orders against The First National Bank of Shiner, Shiner, Texas; Bank of Brenham, N.A., Brenham, Texas; and The First National Bank of Bellville, Bellville, Texas, three subsidiary banks of Industry Bancshares, Inc., Industry, Texas, resolving the Notices of Charges filed on January 2, 2024, in which the OCC alleged, among other things, that each bank engaged in unsafe or unsound practices relating to an investment strategy concentrated in long-term securities that exposed each bank to excessive interest rate risk. The orders also address unsafe or unsound practices relating to corporate governance and, for Bank of Brenham, N.A., and The First National Bank of Bellville, credit administration practices. [Editor's Note: See also the Federal Reserve Board's Cease and Desist Order against Industry Bancshares, Inc. in "Federal Reserve enforcement actions against bank and holding company," in yesterday's Top Stories.]
• A Formal Agreement with The National Bank of Coxsackie, Coxsackie, New York, for unsafe or unsound practices, including those related to corporate and risk governance, strategic and capital planning, liquidity risk management, interest rate risk management, the audit function, and internal controls, and for violations, including those relating to loans to insiders.
• A Personal Cease and Desist Order against Dean A. Lafrentz, former senior vice president at Midstates Bank, N.A., Council Bluffs, Iowa, for falsifying collateral information in a borrower’s loan file, leading the bank to believe it had a surplus, rather than a deficit, of eligible collateral when considering the borrower's loan extension request.
• An Order of Prohibition against Clarice Saw, former financial advisor at a New York, New York, branch of Citibank N.A., Sioux Falls, South Dakota, for obtaining a power of attorney over an elderly bank customer under false pretenses, using the power of attorney to open new accounts, and misappropriating the customer’s funds.

The Federal Reserve Board has announced it has issued cease and desist orders against:

• Small Business Bank, Lenexa, Kansas, for deficiencies in various areas, including the bank's operations and risk management practices, and compliance with the Bank Secrecy Act and related rules and regulations
• Industry Bancshares, Inc., Industry, Texas (jointly issued with the Texas Department of Banking), which owns and controls Bank of Brenham, National Association, Brenham, Texas; The First National Bank of Shiner, Shiner, Texas; The First National Bank of Bellville, Bellville, Texas; Industry State Bank, Industry, Texas; Fayetteville Bank, Fayetteville, Texas; and Citizens State Bank, Buffalo, Texas, for deficiencies with respect to the operations of Bancshares, including with respect to its ability to serve as a source of strength to those banks

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.