Top Story Security Related

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.

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.

Yesterday, the Treasury Department reported that OFAC was sanctioning Amana the Settlement Movement of Gush Emunim Central Cooperative Association Ltd (Amana), a settlement development organization that is involved with U.S.-sanctioned individuals and outposts that perpetrate violence in the West Bank, and its subsidiary Binyanei Bar Amana Ltd. Concurrently, the Department of State was designating three individuals and one entity.

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

The CFPB has published its Personal Financial Data Rights Rule at 89 FR 90838 in this morning's Federal Register.

Subject to the outcome of pending litigation against the rule, it will become final on January 17, 2025, with compliance dates for data providers beginning April 1, 2026; April 1, 2027; April 1, 2028; April 1, 2029; or April 1, 2030, based on the criteria set forth in § 1033.121(c).

FinCEN has updated two FAQs related to access to Beneficial Ownership Information. The topics covered are in Section O (Access FAQs), and include FAQ O1 (Access to BOI for authorized recipients) and FAQ O2 (Access to BOI for Federal agencies).

FAQ O1 indicates that access is being offered in five phases. The first four phases will extend the opportunity to request access to Federal and State, local, and Tribal law enforcement partners. The fifth phase, expected to begin in the spring of 2025, will extend the opportunity to request access to financial institutions subject to due diligence requirements under applicable law and their supervisors.