Top Story Compliance Related

The FDIC, Federal Reserve Board, and the OCC yestereday announced their second notice requesting comment to reduce regulatory burden. The Economic Growth and Regulatory Paperwork Reduction Act of 1996 requires the Federal Financial Institutions Examination Council and federal bank regulatory agencies to review their regulations every 10 years to identify outdated or otherwise unnecessary regulatory requirements for their supervised institutions.

To facilitate this review, the agencies divided their regulations into 12 categories and are now soliciting comments on their regulations in three categories: Consumer Protection; Directors, Officers, and Employees; and Money Laundering. The public has 90 days from publication in the Federal Register to comment on the relevant regulations.

In a related news release, the agencies announced they will hold a virtual public outreach meeting on September 25, 2024, as part of their review of regulations. The outreach meeting is an opportunity for interested stakeholders to present their views on the six categories of regulations listed in the first two Federal Register notices: Applications and Reporting; Powers and Activities; International Operations; Consumer Protection; Directors, Officers and Employees; and Money Laundering.

Individuals interested in providing oral comments must register by August 9, 2024, and indicate the regulatory category they would like to discuss. The agencies will notify those individuals selected to provide comments within one month of registration closing.

Advance registration is not required to attend this virtual public meeting as an observer.

The FDIC, OCC, and Federal Reserve yesterday jointly issued a statement reminding banks of potential risks associated with third-party arrangements to deliver bank deposit products and services. The agencies support responsible innovation and banks engaging in these arrangements in a safe and sound manner and in compliance with applicable law. While these arrangements can provide benefits, supervisory experience has identified a range of safety and soundness, compliance, and consumer-related concerns with the management of these arrangements.

The statement details the potential risks and provides examples of effective risk management practices for these arrangements. In addition, the statement reminds banks of relevant existing legal requirements, guidance, and related resources, and provides insights that the agencies have gained through their supervision. The statement does not establish new supervisory expectations.

Separately, the agencies have requested additional information on a broad range of bank-fintech arrangements, including with respect to deposit, payments, and lending products and services. The agencies are seeking input on the nature and implications of bank-fintech arrangements and effective risk management practices. Responses and comments will be accepted for 60 days following publication of the request for information in the Federal Register

The agencies are considering whether additional steps could help ensure banks effectively manage risks associated with these various types of arrangements.

FDIC FIL-44-2024, issued yesterday, announced that the 2023 voluntary diversity self-assessments can be submitted now and through October 31, 2024. The FDIC encouraged institutions it supervises to voluntarily conduct and submit self-assessments of their diversity policies and practices.

The FDIC has released a notice of the next meeting of its Board, scheduled for 10:00 a.m. on July 30, 2024. A link to a webcast of this open to public observation meeting can be found at https://www.fdic.gov/news/board-matters/video.html.

Matters to be considered include:

• Notice of Proposed Rulemaking on Brokered Deposit Restrictions.
• Notice of Proposed Rulemaking on Parent Companies of Industrial Banks and Industrial Loan Companies.
• Request for Information on Deposits.
• Final Guidance for Title I Resolution Plan Triennial Full Filers and Extension of Submission Deadline.
• Proposals regarding the Change in Bank Control Act Regulations and Procedures.
• Final Rule on Revisions to the FDIC’s Section 19 Regulations.
• Interim Final Rule on Clarification of Deposit Insurance Coverage for Legacy Branches of U.S. Banks in the Federated States of Micronesia, the Marshall Islands, and Palau.
• Notice of Proposed Rulemaking regarding the Financial Data Transparency Act.

On Wednesday, the Treasury Department reported that OFAC has sanctioned a network of six individuals and five entities based in the People’s Republic of China (PRC) involved in the procurement of items supporting the Democratic People’s Republic of Korea’s (DPRK) ballistic missile and space programs.

In violation of multiple UN Security Council Resolutions, the DPRK has continued to conduct launches using ballistic missile technology, including a recent failed effort to place a military satellite into orbit in late May 2024. Moreover, the DPRK has supplied ballistic missiles to the Russian Federation, which continues to target civilian population centers and infrastructure in Ukraine.

For the names and identification information of the designated individuals and entities, see this July 24, 2024, BankersOnline OFAC Update.

FinCEN has updated its Beneficial Ownership Information Frequently Asked Questions to include new information for entities that are disregarded for U.S. tax purposes (Question F.13), as well as updated information that addresses the time frame for obtaining an Employer Identification Number (EIN) from the IRS (Question G.3). An in-page search for "July 24" will take you to the end of each of those new FAQs.

The updated FAQ can be downloaded as a 50-page PDF document, where the two new FAQs begin on pages 31 and 33, respectively.

The CFPB yesterday announced it has issued Consumer Financial Protection Circular 2024-04 to law enforcement agencies on whistleblower protections under section 1057 of the Consumer Financial Protection Act (CFPA). The circular explains how companies may be breaking the law by requiring employees to sign broad nondisclosure agreements that could deter whistleblowing. Imposing sweeping nondisclosure agreements that do not clearly permit communication with law enforcement may intimidate employees from disclosing misconduct or cooperating with investigations. This could impede investigations and potentially violate federal whistleblower protections.

In its press release, the CFPB asserts that whistleblowing plays an important role in addressing illegal and unethical misconduct. In the CFPA, Congress included a provision specifically protecting whistleblowers from retaliation for reporting violations of consumer financial protection laws. Although nondisclosure agreements can be entered into for legitimate purposes, such as ensuring the protection of confidential trade secrets, such agreements, depending on how they are worded and the context, could lead employees to believe they would face lawsuits or other retaliation for reporting suspected misconduct to governmental authorities. An employer can significantly reduce the risk of violating whistleblower protections by ensuring that its agreements expressly permit employees to communicate freely with government enforcement agencies and to cooperate in government investigations.

The Treasury Department yesterday announced that, as part of implementing the historic Rebuilding Economic Prosperity and Opportunity for Ukrainians Act (the “REPO for Ukrainians Act”), OFAC has issued a new reporting requirement for financial institutions holding Russian sovereign assets. Under section 104(a) of the Act, all financial institutions at which Russian sovereign assets are located, and that know or should know of such assets, must provide notice of such assets to OFAC no later than August 2, 2024 or within 10 days of the detection of such assets, and can do so via OFAC’s new form, which can be found on OFAC's Reporting System webpage.

The CFPB yesterday announced it was sending 122,507 payments totaling $53,885,244 to consumers harmed by BrightSpeed Solutions and its founder, Keven Howard.

In 2021, the CFPB brought a lawsuit against the privately-owned, third-party payment processor for knowingly facilitating payments for companies that tricked consumers into expensive and unnecessary antivirus software or services. In many cases, targeted consumers were older adults unaware that the services and software were available for free.

The distribution of payments from the CFPB's Civil Penalty Fund was made yesterday through Epiq Systems.

• CFPB sues third-party payment processor (3/4/2021)
• CFPB bans Brightspeed Solutions and former CEO (1/19/2022)

The Treasury Department yesterday reported that OFAC has targeted a network of three individuals associated with the expanded activities of the Islamic State of Iraq and Syria (ISIS) on the African continent. These individuals serve as key financiers and trusted operatives, enabling the activities of ISIS and its leaders across Central, Eastern, and Southern Africa. They also serve as critical links between far-flung ISIS operations, including ISIS affiliates in the Democratic Republic of the Congo (DRC), Mozambique, Somalia, and ISIS cells in South Africa, allowing ISIS leadership to leverage each affiliate’s capabilities to conduct terrorist attacks that undermine peace and security in the region.

Treasury also reported that OFAC has sanctioned two Mexican members of Cartel de Jalisco Nueva Generacion (CJNG) and two Mexican companies.

For the names and identification information of the designated individuals and entities, see this July 23, 2024, BankersOnline OFAC Update.