Top Story Operations Related

The Office of the Comptroller of the Currency yesterday announced it had issued a comprehensive cease-and-desist order against USAA Federal Savings Bank to require the bank to correct a range of deficiencies. This order replaces prior cease-and-desist orders issued against the bank in 2019 and 2022.

The OCC reported it took this action based on unsafe or unsound practices relating to management, earnings, information technology, consumer compliance, and internal audit and suspicious activity reporting violations. The bank also was not in compliance with OCC’s Heightened Standards requirements for large banks detailed at 12 CFR Part 30, Appendix D.

The order incorporates articles from the 2019 and 2022 orders that remain in noncompliance and requires the bank to take comprehensive corrective actions to enhance its risk governance, compliance risk management, information technology management, fraud risk management, and third-party, affiliate, and shared services risk management. The order also imposes limitations on the bank’s ability to add certain new products and services, as well as expanding its membership criteria.

The NCUA has announced that its Board has approved a final rule that will require federally insured credit union boards of directors to establish succession planning processes for key positions.

The rule requires the board of a federally insured credit union to establish a written succession plan that addresses the specified positions that are vital to the operation and management of the credit union, and regularly review these plans to ensure they are current. The rule also requires newly appointed members of the board to be familiar with those plans within six months after their appointment. For federally insured, state-chartered credit unions in states that have established succession planning requirements, the NCUA will defer to the state’s requirements if no conflict exists between the final rule and the state’s rules.

The rule will become effective January 1, 2026, to help ensure that affected credit unions have the time needed to develop their plans.

The Treasury Department yesterday reported that OFAC has sanctioned two individuals and one entity involved in a network that launders millions of dollars of illicit funds generated by the Democratic People’s Republic of Korea (DPRK) information technology (IT) workers and cybercrime to support the DPRK Government. Based in the United Arab Emirates (UAE), Lu Huaying and Zhang Jian worked through a UAE-based front company to facilitate money laundering and cryptocurrency conversion services that funneled the illicit proceeds back to Pyongyang. This network is led by OFAC-sanctioned Sim Hyon Sop (Sim), a PRC-based banking representative for the DPRK who orchestrates money laundering schemes to fund the regime.

Treasury also reported OFAC action against 12 individuals and eight entities, located across seven countries, who are linked to the global illicit drug trade. These sanctions are the result of strong collaboration with the Drug Enforcement Administration and a range of international law enforcement partners, including in Colombia, Lithuania, and New Zealand. This action was also enabled with support from Treasury’s Financial Crimes Enforcement Network and reporting from financial institutions under the Bank Secrecy Act, and was coordinated closely with various foreign Financial Intelligence Units.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

The Office of the Comptroller of the Currency has reported the key issues facing the federal banking system in its Semiannual Risk Perspective for Fall 2024.

The OCC highlighted credit, operational, compliance, and market risks, as the key risk themes in the report. Highlights from the report include:

• Commercial credit risk remains moderate and shows signs of stabilizing as risks are better identified, monitored, and controlled.
• Overall retail credit risk is stable. Delinquency and loss rates on residential real estate-secured loans held by banks remain historically low but are increasing. Delinquencies in other retail asset classes, namely credit cards and auto loans, reflect an increasing trend.
• Operational risk is elevated. Banks continue to respond to an evolving and increasingly complex operating environment. Evolving cyber threats by sophisticated malicious actors target the financial services industry and their key service providers.
• From a compliance risk perspective, banks continue to operate in a dynamic banking environment as customers’ needs and preferences related to products, services, and delivery channels evolve.
• Community Reinvestment Act (CRA) related risks remain stable as the OCC continues to assess banks’ CRA performance under the 1995/2021 regulatory framework.
• Regarding market risk, banks net interest margin (NIM) performance has varied across bank asset sizes.

A special topic in the report focuses on the increasing trend in external fraud activity targeting consumers and the federal banking system. The frequency of both traditional and novel, more sophisticated fraud activities targeting customers and banks continues to increase. Banks should maintain sound fraud risk management practices through prudent controls and appropriate fraud monitoring capabilities to identify, investigate, mitigate, and report fraudulent activity. Banks can also support their customers by providing educational information about trending fraud activities and ways to protect themselves.

The Department of the Treasury has reported that OFAC has sanctioned nine individuals and seven entities that have provided financial and military support to the Democratic People’s Republic of Korea (DPRK). Also, the U.S. Department of State sanctioned three targets related to the DPRK’s ballistic missile program. These actions reflect the DPRK’s escalating provocation and hostile military posturing that exacerbate global tensions and destabilize regional peace and security.

For the names and identification information of the designated parties, see yesterday's BankersOnline OFAC Update.

The FDIC has released an update to several sections of its Consumer Compliance Examination Manual (CEM). The December 2024 update includes changes in these Chapters:

• Overview of Compliance Examinations (II-1.1): This chapter was updated with technical changes related to supervisory recommendations.
• Review and Analysis (II-5.1): This chapter was updated with technical changes related to supervisory recommendations.
• Documenting the Examination (II-7.1): This chapter was updated with technical changes related to supervisory recommendations.
• Violation Codes (II-14.1): This chapter was with a technical revision to violation code TILA-B 1026.9(g).
• Fair Lending Laws and Regulations (IV-1.1): This chapter was updated with technical changes related to ECOA.
• Equal Credit Opportunity Act (V-7.1): This chapter was updated with technical changes related to ECOA.
• Fair Housing Act (V-8.1): This chapter was updated with technical changes related to ECOA.
• Home Mortgage Disclosure Act (V-9.1): This chapter was updated with technical changes related to supervisory recommendations.
• Unfair, Deceptive, and Abusive Practices — Federal Trade Commission Act/Dodd-Frank Act (VII-1.1): This chapter was updated with technical changes related to ECOA.
• FTC Rule — Preservation of Claims and Defenses (VII-2.1): This chapter was updated with technical revisions.
• Telephone Consumer Protection Act (VIII-5.1): This chapter was updated with technical changes related to supervisory recommendations.
  

The Treasury Department's Office of Foreign Assets Control (OFAC) has announced a $257,690 settlement with C.H. Robinson International Inc. (CHR). CHR agreed to settle its potential civil liability for 82 apparent violations by five of its non-U.S. subsidiaries, which provided freight brokerage or transportation services for shipments in apparent violation of OFAC sanctions on Cuba and Iran. The settlement amount reflects OFAC's determination that the apparent violations were voluntarily self-disclosed and were not egregious.

CHR is a Minnesota-based global transportation and logistics company. Following a series of overseas acquisitions by CHR of freight and logistics firms, between November 2018 and February 2022 five of CHR’s foreign subsidiaries provided freight brokerage or transportation services for 82 shipments, to or from Iran (in two instances), of Iranian- or Cuban-origin goods, or by dealing with an Iranian airline. The vast majority of the apparent violations appear to have occurred because the subsidiaries’ brokerage management systems had not yet been incorporated into CHR’s system or otherwise updated to include the latest sanctions compliance controls and did not screen for potentially violative transactions.

Further details can be found in OFAC's Enforcement Release.

The FDIC has published [89 FR 101014] a "Sunshine Act" notice of its next Board of Directors meeting, scheduled for 10:00 a.m. EST on Tuesday, December 17, 2024. The meeting will be open to public observation only by webcast. Matters on the agenda for consideration include:

• Proposed 2025 FDIC Operating Budget
• Discussion Draft relating to FDIC Policy regarding the Annunzio-Wylie Anti-Money Laundering Act
• Discussion Draft relating to FDIC Policy on Bank Capital Distributions in Unusual and Exigent Circumstances

The CFPB this morning announced it has finalized its Overdraft Lending: Very Large Financial Institutions Rule, which will apply to banks and credit unions with more than $10 billion in assets. The reforms in the rule will allow large banks three options to manage their overdraft lending program:

• Cap their overdraft fee at $5: Under this simple option, covered banks and credit unions could simply cap their fee at $5, which is the estimated level at which most banks could be able to cover their costs associated with administering a courtesy overdraft program.
• Cap their fee at an amount that covers costs and losses: For banks that wish to offer overdraft as a convenient service rather than as a profit center, the final rule allows financial institutions to set their fee at an amount that covers their costs and losses.
• Disclose the terms of their overdraft loan just like other loans: For financial institutions that wish to profit from overdraft lending, they may do so by complying with the standard requirements governing other loans, like credit cards. This would include giving consumers a choice on whether to open the line of overdraft credit, providing account-opening disclosures that would allow comparison shopping, sending periodic statements, and giving consumers a choice of whether to pay automatically or manually.

The final rule, which will amend Regulations E and Z, is expected to add up to $5 billion in annual overdraft fee savings to consumers, or $225 per household that pays overdraft fees. It will become effective October 1, 2025.

• Executive Summary of the Overdraft Lending: Very Large Financial Institutions rule
• Unofficial Redline of the final rule

The Financial Stability Board (FSB) published today its finalized recommendations to promote greater alignment in data frameworks related to cross-border payments and consistency in the regulation and supervision of bank and non-bank payment service providers.

These recommendations advance key actions from the G20 Roadmap to address legal, supervisory, and regulatory issues in cross-border payments. As part of these efforts and to enhance private sector engagement, the FSB is inviting market stakeholders in cross-border payments to join its Taskforce on Legal, Regulatory, and Supervisory matters (LRS Taskforce).

• Press release