Top Story Security Related

The Treasury Department has announced that OFAC has sanctioned five Mexican individuals associated with the Gulf Cartel, one of Mexico’s most dangerous criminal organizations. Those designated today are tied to the Gulf Cartel’s involvement in criminal activities associated with illegal, unreported, and unregulated fishing, human smuggling, and narcotics trafficking in the Gulf of Mexico.

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

OFAC has posted a Notice announcing that it will retire its RSS feed on January 31, 2025. Email updates on recent updates will continue, and can be subscribed to HERE.

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 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 reported it has issued an Order of Prohibition barring Shan Hanes, former chief executive officer of Heartland Tri-State Bank, Elkhart, Kansas, for using his position to embezzle $47.1 million of bank funds in a cryptocurrency scheme that led to the bank becoming insolvent and failing in 2023.

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 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.