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The Financial Crimes Enforcement Network (FinCEN) has reported it has issued an Alert [FIN-2024-Alert005] to raise awareness of fraud schemes abusing FinCEN’s name, insignia, and authorities for financial gain. These FinCEN-specific fraud schemes include scams that exploit beneficial ownership information reporting; misuse FinCEN’s Money Services Business Registration tool; or involve the impersonation of, or misrepresent affiliation with, FinCEN and its employees.

The alert provides guidance to the public on how to identify and avoid these scams and provides typologies and red flag indicators to help financial institutions detect, prevent, and report potential suspicious activity to FinCEN. The public is reminded that any solicitations from individuals or entities abusing FinCEN’s name, insignia, or authorities, or impersonating a FinCEN employee should be reported to Treasury’s Office of Inspector General and the Federal Trade Commission.

Suspicious Activity Reports concerning these fraud schemes should reference FinCEN's alert by including the key term "“FIN-2024-FINCENSCAMS” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative. Financial institutions should also select SAR field 34(z) (Fraud – Other) and include any other relevant terms, including “BOI Scam,” “MSB Scam,” and/or “FinCEN Imposter Scam” in the text box, as applicable.

The Financial Stability Board (FSB) has published a consultation report on leverage in non-bank financial intermediation (NBFI). The proposed policy recommendations are addressed to FSB member authorities and standard-setting bodies. They aim to enhance the ability of authorities and market participants to monitor vulnerabilities from NBFI leverage, contain NBFI leverage where it may create risks to financial stability, and mitigate the impact of these risks.

The nine policy recommendations cover:

• Risk identification and monitoring, supported by a suite of risk metrics, and work to assess and address data challenges
• Measures to address financial stability risks related to NBFI leverage in core financial markets, including measures that affect specific activities, types of entities, and concentration-related risks
• Counterparty credit risk management and private disclosure
• Addressing inconsistencies by adopting the principle of “same risk, same regulatory treatment”
• Enhancing cross-border cooperation and collaboration

Entities in scope are non-bank financial firms that use leverage, either financial or synthetic, including hedge funds, other leveraged investment funds, pension funds, and insurance companies. Where relevant, banks and broker-dealers are also in scope in their role as leverage providers.

• Financial Stability Board press release

The Department of the Treasury yesterday reported that OFAC had sanctioned two entities and two individuals for their role in developing and procuring components for sensitive navigational systems for the Iranian military. Concurrent with this action, the U.S. Department of State designated one individual and two entities involved in Iranian UAV and missile development.

Treasury also reported that OFAC had designated three individuals and four entities in Bosnia and Herzegovina (BiH) that form part of U.S.-designated Republika Srpska (RS) President Milorad Dodik’s (Dodik) financial network and enable the Dodik family’s continued attempts to evade sanctions. OFAC's action also targets a BiH politician who serves as a key enabler of Dodik’s corruption and destabilizing political agenda. OFAC also designated Viktor Pavlovich Perevalov for operating or having operated in the construction sector of the Russian Federation economy.

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

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.