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A notice was posted to the Department of Defense's MLA site that, due to scheduled maintenance, the MLA website will not be available on Saturday, June 13, 2024, from 6:00 PM PDT until 10:00 PM PDT (9:00 PM EDT on Saturday until 1:00 AM EDT on Sunday). The notice clearly should refer to July 13, which falls on Saturday, not June 13.

The FDIC has issued a list of 64 banks examined for compliance with the Community Reinvestment Act who were assigned evaluation ratings in April 2024. Four of those banks — The Peoples Bank, Gambier, Ohio; Union Bank, Lake Odessa, Michigan; Bank of Crocker, Waynesville, Missouri; and Forbright Bank, Potomac, Maryland — were rated "Needs to Improve." Fifty-eight banks received "Satisfactory" ratings.

We congratulate two banks — Bank of Charles Town, Charles Town, West Virginia, and UBS Bank USA, Salt Lake City, Utah — who received ratings of "Outstanding."

On Monday, the Treasury Department, as Chair of the Committee on Foreign Investment in the United States (CFIUS), issued a Notice of Proposed Rulemaking that would expand CFIUS’s jurisdiction over certain transactions by foreign persons involving real estate in the United States. Under legislation that Congress passed in 2018, CFIUS has the authority to review certain real estate transactions near specified military installations and to take action in appropriate circumstances. This proposed rule would add over 50 military installations, across 30 states, to the existing list of installations around which CFIUS has jurisdiction, including over land purchases.

The proposed rule would enhance CFIUS’s authorities through the following key changes:

• Expand CFIUS’s jurisdiction over real estate transactions to include those within a one-mile radius around 40 additional military installations;
• Expand CFIUS’s jurisdiction over real estate transactions to include those within a 100-mile radius around 19 additional military installations;
• Expand CFIUS’s jurisdiction over real estate transactions between 1 mile and 100 miles around eight military installations already listed in the regulations;
• Update the names of 14 military installations already listed in the regulations to better assist the public in identifying the relevant sites; and
• Update the location of seven military installations already listed in the current regulations to better assist the public in identifying the relevant sites.

Comments on the proposal will be accepted for 30 days following the NPRM’s publication in the Federal Register.

FinCEN has updated its Beneficial Ownership Information Frequently Asked Questions, adding three new Reporting Company questions (questions C.12 – C.14), and one new Beneficial Owner question (question D.17).

In related news, FinCEN has posted an alert on its Beneficial Ownership Information webpage concerning fraudulent attempts to solicit information from individuals and entities who may be subject to reporting requirements under the Corporate Transparency Act.

The Federal Reserve Board's archive of evaluations of member banks' Community Reinvestment Act compliance includes 15 evaluations made public by the Reserve Banks in June 2024, all of which carried Satisfactory ratings.

OFAC has issued OFAC Guidance: Production Submission Standards, updating its former delivery standards. The new document provides technical and general guidance to persons submitting material to OFAC and applies primarily to persons providing responses to administrative subpoenas, requests for information, disclosures, and especially for submissions that may entail voluminous documentation (e.g., more than 100 pages).

The Federal Reserve Board has released its July 2024 Monetary Policy Report [HTML] [PDF] to Congress. The report contains discussions of “the conduct of monetary policy and economic developments and prospects for the future.”

The report is submitted semiannually to the Senate Committee on Banking, Housing, and Urban Affairs and to the House Committee on Financial Services, along with testimony from the Federal Reserve Board Chair.

On Wednesday, FinCEN reported that the Financial Action Task Force (FATF), an intergovernmental body that establishes international standards for anti-money laundering, countering the financing of terrorism, and countering the financing of proliferation of weapons of mass destruction (AML/CFT/CPF), issued a public statement at the conclusion of its plenary meeting last month highlighting the growing financial connectivity of the Democratic People’s Republic of Korea (DPRK) with the international financial system, and reiterating the FATF’s concerns over the DPRK’s continued failure to address the significant deficiencies in its AML/CFT regime and the serious threats posed by the DPRK’s illicit activities related to the proliferation and financing of weapons of mass destruction. In order to protect the international financial system, the FATF continues to urge all jurisdictions to remain vigilant to these risks and calls for renewed implementation and enforcement of countermeasures against the DPRK.

The FATF also updated its lists of jurisdictions with strategic AML/CFT/CPF deficiencies. U.S. financial institutions should consider the FATF’s stance toward these jurisdictions when reviewing their obligations and risk-based policies, procedures, and practices.

On June 28, 2024, the FATF added Monaco and Venezuela to its list of Jurisdictions Under Increased Monitoring and also removed Jamaica and Türkiye from the list.

The FATF’s list of High-Risk Jurisdictions Subject to a Call for Action remains the same, with Iran, DPRK, and Burma subject to calls for action. Iran and DPRK are still subject to the FATF’s countermeasures, while Burma is still subject to the application of enhanced due diligence, but not countermeasures.

The CFPB yesterday announced publication of an edition of its Supervisory Highlights sharing key findings from recent examinations of auto and student loan servicing companies, debt collectors, and other financial services providers. The report also highlights consumer complaints about medical payment products and identifies concerns with providers preventing access to deposit and prepaid account funds.

The Federal Housing Finance Agency yesterday announced the publication of updated aggregate statistics from the National Mortgage Database (NMDB) and launched the NMDB Aggregate Statistics Dashboard—a new data visualization tool for the NMDB Outstanding Residential Mortgage Statistics.

Yesterday’s release describes outstanding residential mortgage debt at the end of the first quarter of 2024. Highlights include:

• There were 50.8 million outstanding mortgages with unpaid balances totaling $11.7 trillion at the end of the first quarter of 2024.
• 21.9 percent of outstanding mortgages have interest rates below 3 percent, down slightly from a high of 24.6 percent in the first quarter of 2022. 14.3 percent of outstanding mortgages have interest rates of 6 percent or higher.
• Adjustable-rate mortgages (ARMs) account for 3.5 percent of outstanding mortgages, down from 9.6 percent one decade ago.
• The median monthly payment among outstanding mortgages is $1,520.
• The average credit score among borrowers with an active loan is 743.

The Department of Housing and Urban Development yesterday announced it has entered a Conciliation Agreement between Burbank Housing Management Corporation, Burbank Housing Development Corporation, BHDC Parkwood Apartments, LLC, Oak Ridge Apartments Associates LP, and James Perez, requiring the respondents to pay $41,500 in compensation to the complainant. The Agreement resolves allegations that the respondents were in noncompliance with Section 504 of the Rehabilitation Act of 1973 and also violated the Fair Housing Act by discriminating against tenants with disabilities.

The Agreement stems from a complaint by Fair Housing Advocates of Northern California alleging that the Sonoma County, California, based housing providers interfered with the rights of tenants with disabilities to obtain reasonable accommodations. The Respondents denied the allegations in the Complaint and agreed to settle the matter. The Conciliation Agreement does not constitute an admission of guilt by the Respondents and no determination has been issued by HUD in this matter.

Under the terms of the Agreement, the housing providers will pay $41,500 to the complainant. The housing providers will also ensure their reasonable accommodation policies are in compliance with the Fair Housing Act and Section 504 and that they process reasonable accommodation requests in a timely manner

On Monday, the Treasury Department reported that OFAC has sanctioned a Mexico-based money launderer and China-based members of a money laundering organization with criminal links to the Sinaloa Cartel as part of ongoing efforts to disrupt the flow of illicit narcotics into the United States.

For the names and identification information of the three individuals, see the July 1, 2024, BankersOnline OFAC Update.

The FDIC has issued Financial Institution Letters with guidance to help financial institutions and facilitate recovery in areas of Iowa and New Mexico.

• FIL-37-2024, addressing institutions in areas of New Mexico (Mescalera Tribe; Lincoln and Otero Counties) affected by the South Fork Fire and Salt Fire on June 17, 2024, and continuing
• FIL-38-2024, addressing institutions in areas of Iowa (Clay, Emmet, Lyon, Sioux, and Plymouth Counties) affected by severe storms, flooding, straight-line winds, and tornadoes on June 16, 2024, and continuing

The NCUA has announced its barring of three individuals from participating in the affairs of any federally insured depository institution.

• Tracy Mikulencak, a former employee of A+ Federal Credit Union, Austin, Texas, agreed to the issuance of a prohibition order following a finding that she fraudulently took funds out of her own teller drawer, the Georgetown branch’s vault, and member accounts, defrauding the credit union and its members of $325,708.
• Javier DeJesus Narciso, a former employee of Merced School Employees Federal Credit Union, Merced, California, was issued a prohibition notice based on his conviction on one count of grad theft and embezzlement in connection with his employment
• Philip Brian Topping, a former employee of New Pilgrim Federal Credit Union, Birmingham, Alabama, was issued a prohibition notice based on his conviction on on one count of theft and embezzlement in connection with his employment

The OCC has released a list of CRA performance evaluation ratings made public by the OCC during the month of June. Of the 21 institutions listed, 14 received ratings of Satisfactory.

Six of the institutions received a rating of Outstanding. We congratulate each of them:

• Dollar Bank, Federal Savings Bank, Pittsburgh, Pennsylvania
• Falcon National Bank, Foley, Minnesota
• First National Bank Alaska, Anchorage, Alaska
• First National Community Bank, New Richmond, Wisconsin
• Home Federal Savings and Loan Association Bamberg, South Carolina
• Webster Bank, National Association, Stamford, Connecticut

American Commercial Bank & Trust, National Association, Ottawa, Illinois, received a Needs to Improve rating.

On Monday, the Federal Reserve Board announced it had fined Silvergate Capital Corporation and Silvergate Bank $43 million for deficiencies in Silvergate's monitoring of transactions in compliance with anti-money laundering laws.

The action was taken in coordination with an action by the Department of Financial Protection and Innovation of the State of California, the state supervisor of Silvergate. The penalties announced by the Board and state total $63 million. The U.S. Securities and Exchange Commission separately announced a penalty against Silvergate Capital Corporation.

Silvergate separately announced last year that it was voluntarily winding down its operations, and has now paid back all deposits to its customers.

• Consent order of assessment of civil money penalty

On Friday, FinCEN announced a proposed rule to strengthen and modernize financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs. While financial institutions have long maintained AML/CFT programs under existing regulations, this proposed rule would amend those regulations to explicitly require that such programs be effective, risk-based, and reasonably designed, enabling financial institutions to focus their resources and attention in a manner consistent with their risk profiles. Effective, risk-based, and reasonably designed AML/CFT programs are critical for protecting national security and the integrity of the U.S. financial system. The proposed amendments are based on changes to the Bank Secrecy Act (BSA) as enacted by the Anti-Money Laundering Act of 2020 (AML Act) and are a key component of Treasury’s objective of building a more effective and risk-based AML/CFT regulatory and supervisory regime.

This proposed rule would:

• amend the existing program rules to explicitly require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process
• require financial institutions to review government-wide AML/CFT priorities and incorporate them, as appropriate, into risk-based programs, as well as provide for certain technical changes to program requirements
• promote clarity and consistency across FinCEN’s program rules for different types of financial institutions

The proposal also articulates certain broader considerations for an effective and risk-based AML/CFT framework as envisioned by the AML Act. For example, through its emphasis on risk-based AML/CFT programs, the proposed rule seeks to avoid one-size-fits-all approaches to customer risk that can lead to financial institutions declining to provide financial services to entire categories of customers. Friday’s proposal is consistent with a key recommendation in Treasury’s De-risking Strategy, which recommended proposing regulations to require financial institutions to have reasonably designed and risk-based AML/CFT programs supervised on a risk basis and taking into consideration the effects of financial inclusion. Finally, the proposed rule would encourage financial institutions to modernize their AML/CFT programs where appropriate to responsibly innovate, while still managing illicit finance risks.

FinCEN's proposal was prepared in consultation with the Federal Reserve Board, the OCC, the FDIC, and the NCUA in order to collectively issue proposed amendments to their respective BSA compliance program rules for the institutions they supervise.

Written comments on FinCEN’s proposed rule must be received on or before 60 days following its publication in the Federal Register.

• Proposed Rule
• Fact Sheet
• Publication update: Published on 7/3/2024 at 89 FR 55428 with a comment period ending on 9/3/2024

The FDIC has released a list of enforcement orders issued in May 2024 against FDIC-supervised financial institutions and individuals formerly or currently affiliated with such institutions.

Flood Insurance Violations:

• Oriental Bank, San Juan, Puerto Rico, was assessed a civil money penalty of $447,125
• Spring Valley Bank, Wyoming, Ohio, was assessed a $1,500 civil money penalty

Cease and Desist or Consent Orders:

• Old Glory Bank, Elmore City, Oklahoma
• Forbright Bank, Potomac, Maryland
• Community Bank and Trust - West Georgia, LaGrange Georgia
• Thread Bank, Rogersville, Tennessee
• TNBANK, Oak Ridge, Tennessee
• Union County Savings Bank Elizabeth, New Jersey
• California Business Bank, Irvine, California

Orders against individuals:

• Justin L. Holt, former SVP and loan officer at Bank of Tyler, Tyler, TX (now known as UBank, Huntington, TX), received a personal consent order and order to pay a $25,000 civil money penalty after a finding that he repeatedly caused the disbursement of loan funds on a construction loan without properly documenting the disbursements and without requiring or verifying progress or completion of construction per bank policy, thus resulting in a dissipation of loan proceeds by the borrower; and misrepresented the status of such construction in an effort to obscure those actions.
• Hector Hugo Gutierrez Jr., formerly affiliated with Branch Banking and Trust Company (now Truist Bank, Charlotte, North Carolina) was issued a prohibition order.
• Yvonne Han, affiliated with 1st Colonial Community Bank, Collingswood, New Jersey, was issued a personal consent order

The CFPB and the FHFA have announced their publication of updated loan-level data for public use collected through the National Survey of Mortgage Originations (NSMO). The data also provide updated mortgage performance and credit information for a nationally representative sample of mortgage borrowers from 2013 to 2021.

Since 2014, FHFA and CFPB have sent quarterly surveys to borrowers who recently obtained mortgages. These surveys gather feedback on borrowers’ experiences during the mortgage process, their perceptions of the mortgage market, and their future expectations. Yesterday’s release adds one additional year of new mortgage data through 2021. It also features data on three new survey questions first asked of mortgage borrowers in 2021:

• When asked about appraisal satisfaction, 70 percent of respondents reported being very satisfied with their property appraisal, 23 percent reported being somewhat satisfied, and 6 percent were not at all satisfied.
• When questioned on their willingness to move from their primary residence, 50 percent of respondents reported being unwilling to move, 20 percent were unsure about moving, 25 percent were willing and able to move, and 5 percent were willing but unable to move.
• When prompted to select from a list of factors important to borrowers choosing a mortgage lender/broker, 8 percent of respondents selected accommodations for people with disabilities as an important factor in their choice.

The SCOTUS Blog reported Friday that the Supreme Court cut back the power of federal agencies to interpret the laws they administer and ruled that courts should rely on their own interpretation of ambiguous laws.

By a vote of 6-3, the justices overruled their landmark 1984 decision in Chevron v. Natural Resources Defense Council, which gave rise to the doctrine known as the Chevron doctrine. Under that doctrine, if Congress has not directly addressed the question at the center of a dispute, a court was required to uphold the agency’s interpretation of the statute as long as it was reasonable. But in a 35-page ruling by Chief Justice John Roberts, the justices rejected that doctrine, calling it “fundamentally misguided.”

OFAC has announced a $538,000 settlement with Mondo TV, S.p.a., an Italy-based animation company. Mondo has agreed to settle its potential civil liability for 18 apparent violations of the North Korea Sanctions Regulations.

Between May 2019 and November 2021, Mondo caused U.S. financial institutions to process approximately $537,939 in payments for animation work Mondo outsourced to a Government of North Korea-owned animation studio. This settlement amount reflects OFAC's determination that Mondo's conduct was non-egregious but not voluntarily disclosed.

Yesterday, the U.S. Supreme Court stripped the Securities and Exchange Commission of a major tool in fighting securities fraud in a decision that could also affect other regulatory agencies, reports AP News.

The justices ruled in a 6-3 vote that people accused of fraud by the SEC, which regulates securities markets, have the right to a jury trial in federal court. The in-house proceedings the SEC has used in some civil fraud complaints, including against Houston hedge fund manager George Jarkesy, violate the Constitution, the court said.

The CFPB has posted a Bureau Blog article announcing the Bureau's release of its Fair Lending Annual Report to Congress describing the Bureau's actions against unlawful discrimination and for advancing access to fair credit in calendar year 2023.

FinCEN has reported it has issued a final rule under section 311 of the USA PATRIOT Act (section 311) that severs Al-Huda Bank from the United States financial system by prohibiting domestic financial institutions and agencies from opening or maintaining a correspondent account for or on behalf of Al-Huda Bank, an Iraqi bank that serves as a conduit for terrorist financing.

On January 31, 2024, FinCEN issued a finding and notice of proposed rulemaking (NPRM) that identified Al-Huda Bank as a foreign financial institution of primary money laundering concern. As described in the finding, Al-Huda Bank has for years exploited its access to U.S. dollars to support designated foreign terrorist organizations, including Iran’s Islamic Revolutionary Guard Corps (IRGC) and IRGC-Quds Force, as well as Iran-aligned Iraqi militias Kata’ib Hizballah and Asa’ib Ahl al-Haq. Moreover, the chairman of Al-Huda Bank is complicit in Al-Huda Bank’s illicit financial activities, including money laundering through front companies that conceal the true nature of and parties involved in illicit transactions, ultimately enabling the financing of terrorism.

FinCEN is taking this section 311 action to protect the United States financial system from Al-Huda Bank’s illicit activity. Pursuant to this final rule, covered financial institutions are now prohibited from opening or maintaining correspondent accounts for or on behalf of Al-Huda Bank, and are required to take reasonable steps not to process transactions for the correspondent account of a foreign banking institution in the United States if such a transaction involves Al-Huda Bank, preventing indirect access by Al-Huda Bank to the United States financial system. This final rule also requires covered financial institutions to apply special due diligence to their foreign correspondent accounts that is reasonably designed to guard against their use to process transactions involving Al-Huda Bank.

The rule adds section 663 to 31 CFR Part 1010, effective upon publication in the Federal Register. BankersOnline has added section 663 to its 31 CFR Part 1010 pages.

The OCC has reported on the performance of first-lien mortgages in the federal banking system during the first quarter of 2024.

The OCC Mortgage Metrics Report, First Quarter 2024 showed that 97.4 percent of mortgages included in the report were current and performing at the end of the quarter, an increase from 97.2 percent in fourth quarter 2023, and a decrease from 97.6 percent a year ago.

The percentage of seriously delinquent mortgages—mortgages that are 60 or more days past due and all mortgages held by bankrupt borrowers whose payments are 30 or more days past due—decreased from the previous quarter and has trended down since the first quarter of 2022.

Servicers initiated 7,408 new foreclosures in the first quarter of 2024, a decrease from the previous quarter and from a year earlier.

The Federal Reserve Board yesterday announced that the results of its annual bank stress test showed that while large banks would endure greater losses than last year's test, they are well positioned to weather a severe recession and stay above minimum capital requirements. Additionally, the Board published aggregate results from its first exploratory analysis, which will not affect bank capital requirements.

The Board's stress test is one tool to help ensure that large banks can support the economy during downturns. The test evaluates the resilience of large banks by estimating their capital levels, losses, revenue and expenses under a single hypothetical recession and financial market shock, using banks' data as of the end of last year. The individual results from the stress test inform a bank's capital requirements to help ensure a bank could survive a severe recession and financial market shock.

The Board also conducted an exploratory analysis, including two funding stresses to all banks tested and two trading book stresses to only the largest and most complex banks. The exploratory analysis is distinct from the stress test, exploring additional hypothetical risks to the broader banking system.

The two funding stresses include a rapid repricing of deposits, combined with a more severe and less severe recession. Under each element, large banks would remain above minimum capital requirements in aggregate, with capital ratio declines of 2.7 percentage points and 1.1 percentage points, respectively. Under the two trading book stresses, which included the failure of five large hedge funds under different market conditions, the largest and most complex banks are projected to lose between $70 billion and $85 billion. The results demonstrated that these banks have material exposure to hedge funds but that they can withstand different types of trading book shocks.

The CFPB on Tuesday announced its issuance of an interim final rule with a request for public comment to amend Regulation B to extend the compliance dates set forth in its 2023 small business lending rule and to make other date-related conforming adjustments.

The interim final rule will be effective 30 days after publication of the rule in the Federal Register. Comments will be accepted within the same 30-day period.

The rule extends compliance dates by 290 days, which is the time that has elapsed between the Texas court’s first issuance of a stay last year and the Supreme Court’s decision in CFPB v. CFSA last month. Lenders with the highest volume of small business loans must begin collecting data by July 18, 2025; moderate volume lenders by January 16, 2026; and the smallest volume lenders by October 18, 2026. The deadline for reporting small business lending data to the CFPB remains June 1 following the calendar year for which data are collected. Under the interim final rule, lenders may continue using their small business originations from 2022 and 2023 to determine their initial compliance date, or instead use their originations from 2023 and 2024.

Lenders may choose to start collecting data earlier. The rule permits lenders to collect demographic data up to one year before their compliance date to test their procedures and systems. The CFPB has also updated its grace period to reflect the revised dates. The CFPB does not intend to assess penalties for reporting errors for the first 12 months of collection, and it intends to conduct examinations only to assist lenders in diagnosing compliance weaknesses, so long as lenders engage in good faith compliance efforts.

BankersOnline has updated section 1002.114 of its Regulation B pages to reflect the changes in the interim final rule.

PUBLICATION AND EFFECTIVE DATE: Published at 89 FR 55024 in the Federal Register for 7/3/2024, with an effective date of 8/2/2024 (comments on the interim final rules will be accepted through 8/2/2024).

The National Credit Union Administration released today its annual Cybersecurity and Credit Union System Resilience Report. The report summarizes the current cybersecurity threat landscape, highlights the agency’s key cybersecurity initiatives, and outlines the agency’s ongoing efforts to enhance cybersecurity preparedness and resilience within the credit union industry.

The Treasury Department yesterday reported that OFAC had sanctioned nearly 50 entities and individuals that constitute multiple branches of a sprawling “shadow banking” network used by Iran’s Ministry of Defense and Armed Forces Logistics (MODAFL) and Islamic Revolutionary Guard Corps (IRGC) to gain illicit access to the international financial system and process the equivalent of billions of dollars since 2020. MODAFL and the IRGC engage in several commercial revenue-generating activities, most notably the sale of Iranian oil and petrochemicals.

Networks of Iranian exchange houses and dozens of foreign cover companies under their control enable MODAFL and the IRGC to disguise the revenue they generate abroad that is then available to use for a range of MODAFL and IRGC activities, including the procurement and development of advanced weapons systems such as unmanned aerial vehicles. This revenue also supports the provision of weapons and funding to Iran’s regional proxy groups, including Yemen’s Houthis, who continue a campaign of reckless attacks on global shipping, as well as the transfer of UAVs to Russia for use in its war of aggression against Ukraine.

For the names and identification information of the designated parties, see the June 25, 2024, BankersOnline OFAC Update.

The Federal Reserve Board has announced the execution of a written agreement between Pedcor Financial, LLC (Carmel, Indiana), Pedcor Financial Bancorp (Carmel, Indiana), Fidelity Federal Bancorp (Evansville, Indiana), and the Federal Reserve Bank of Chicago, to address capital planning, risk management, contingency funding planning, and oversight by senior management and the board of directors of United Fidelity Bank, FSB (Evansville, Indiana).

The FHFA has reported the U.S. house prices rose in April, up 0.2 percent from March, according to its seasonally adjusted monthly House Price Index (HPI). House prices rose 6.3 percent from April 2023 to April 2024. The previously reported 0.1 percent price increase in March was revised downward to 0.0 percent.

For the nine census divisions, seasonally adjusted monthly price changes from March 2024 to April 2024 ranged from -0.2 percent in the West South Central and Middle Atlantic divisions to +1.4 percent in the East South Central division. The 12-month changes were all positive, ranging from +3.0 percent in the West South Central division to +8.5 percent in the New England and Middle Atlantic divisions.

“U.S. house prices continued to rise in April,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “However, the appreciation rate slowed in April amid a slight rise in both mortgage rates and housing inventory. The housing market in general began to show some signs of normalization.”

The Securities and Exchange Commission has announced it has updated its list of unregistered entities that use misleading information to solicit primarily non-U.S. investors, adding 24 soliciting entities, six impersonators of genuine firms, and four bogus regulators.

The SEC’s list of soliciting entities that have been the subject of investor complaints, known as the Public Alert: Unregistered Soliciting Entities (PAUSE) list, enables investors to better inform themselves and avoid being victims of fraud. The latest additions are firms that SEC staff found were providing inaccurate information about their affiliation, location, or registration. Under U.S. securities laws, firms that solicit investors generally are required to register with the SEC and meet minimum financial standards and disclosure, reporting, and recordkeeping requirements.

In addition to alerting investors to firms falsely claiming to be registered, the PAUSE list flags those impersonating registered securities firms and bogus regulators who falsely claim to be government agencies or affiliates. Inclusion on the PAUSE list does not mean the SEC has found violations of U.S. federal securities laws or made a judgment about the merits of any securities being offered.

The FDIC has issued FIL-36-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Florida — Leon County — affected by severe storms, straight-line winds, and tornadoes on May 10, 2024.

Yesterday, the CFPB published a Bureau Blog article announcing the Bureau's approval of a new rule to address the current and future applications of complex algorithms and artificial intelligence used to estimate the value of a home. The new rule was approved last week by the OCC (and reportedly by the FDIC). The rule is to be jointly issued by the OCC, Federal Reserve Board, FDIC, NCUA, CFPB, and FHFA once approved by each of those agencies.

The OCC has requested comment on a proposal to revise its recovery planning guidelines for certain large insured national banks, federal savings associations, and federal branches (banks).

The proposed rulemaking is part of the OCC’s effort to ensure that large banks are adequately prepared and have developed a plan to respond to the financial effects of severe stress, particularly in light of the contagion effects and systemic risks they may pose.

The proposal would:

• Expand recovery planning guidelines to apply to banks with at least $100 billion in assets
• Incorporate a testing standard for recovery plans
• Clarify the role of non-financial risk (including operational and strategic risk) in recovery planning

Comments from the public will be accepted for 30 days following publication of the proposed in the Federal Register.
Publication and comment period update: Published 7/3/2024 at 89 FR 55114. The comment period will close 8/2/2024.

The Federal Reserve Board has announced it will extend until September 6, 2024, the comment period on its proposal to expand the operating days of the Federal Reserve Banks' two large-value payments services, Fedwire Funds Service and the National Settlement Service (NSS), to include weekends and holidays. The Board extended the comment period to allow the public more time to analyze the proposal and prepare their comments. Comments on the proposal were originally due by July 8, 2024.

Currently, both the Fedwire Funds Service and the NSS operate Monday through Friday, excluding holidays. Under the proposal, both services would operate every day of the year. The operating hours each day would remain the same, with the Fedwire Funds Service open 22 hours per day, and NSS open 21.5 hours per day. The proposal does not include changes to the Fedwire Securities Service or the Federal Reserve's new retail service for instant payments, the FedNow Service.

• Federal Register Notice, published 6/26/2024 at 89 FR 53425

The FDIC has issued FIL-35-2024 with steps intended to provide regulatory relief to financial institutions and facilitate recovery in areas of Oklahoma — Blaine, Caddo, Custer, Delaware, Jackson, Mayes, Muskogee, and Rogers Counties — affected by severe storms, straight-line winds, tornadoes, and flooding from May 19, 2024, to May 28, 2024.

The Federal Housing Finance Agency has announced its conditional approval for Freddie Mac to engage in a limited pilot to purchase certain single-family closed-end second mortgages. This conditional approval follows FHFA’s first publication of a proposed new product by either Freddie Mac or Fannie Mae (the Enterprises) for public comment under the new process mandated by the Prior Approval for Enterprise Products regulation, which became effective in April 2023.

The conditional approval of a pilot for Freddie Mac purchases of second mortgages includes several limitations on the product, including:

• A maximum volume of $2.5 billion in purchases;
• A maximum duration of 18 months;
• A maximum loan amount of $78,277, corresponding to certain subordinate-lien loan thresholds in the Consumer Financial Protection Bureau’s definition of Qualified Mortgage;
• A minimum seasoning period of 24 months for the first mortgage; and
• Eligibility only for principal/primary residences.

Upon the pilot’s conclusion, FHFA will analyze the data on Freddie Mac’s purchases of second mortgages to determine whether the objectives of the pilot were met. FHFA has determined that any increase to the volume or extension of the duration of the pilot, or a conversion of the pilot to a programmatic activity, would be treated as a new product that is subject to public notice and comment and FHFA approval. Any subsequent approval would be informed by the preliminary results of the pilot.

The FDIC and Federal Reserve Board have jointly announced that, following their joint review of the July 2023 resolution plan submissions of the eight largest and most complex banks, they identified a weakness in the plans from Bank of America, Citigroup, Goldman Sachs, and JPMorgan Chase. The agencies did not identify any weaknesses in the plans from the other banks.

The agencies jointly identified a weakness in the 2023 plan submitted by Citigroup, but reached different conclusions on its severity. The FDIC determined that the Citigroup plan is not credible or would not facilitate an orderly resolution under the U.S. Bankruptcy Code and considers the weakness to be a "deficiency." A deficiency is a weakness that could undermine the feasibility of the plan. The Board concluded that the weakness is only a shortcoming. Under the resolution planning rule of the agencies, when one agency finds a shortcoming in a resolution plan and the other agency finds a deficiency, the plan is deemed to have a shortcoming. As a result, Citigroup's 2023 plan is considered to have a shortcoming. The agencies also previously identified a shortcoming in Citigroup's 2021 plan related to data quality and data management, and that shortcoming remains outstanding.

The agencies provided feedback letters to each of the eight banks that identify areas for continued development of banks' resolution strategies and capabilities. For the four banks with an identified shortcoming, the letters describe the specific weaknesses resulting in the shortcoming and the remedial actions required by the agencies. The shortcomings are to be addressed in the next resolution plans due by July 1, 2025. The feedback letters also specify that each bank, in its 2025 resolution plan submission, should address the topics of contingency planning and obtaining foreign government actions necessary to execute the resolution strategy.

2023 Resolution Plan Feedback Letters:

• Bank of America Corporation
• Bank of New York Mellon Corporation
• Citigroup Inc.
• The Goldman Sachs Group
• JPMorgan Chase & Co.
• Morgan Stanley
• State Street Corporation
• Wells Fargo & Company

The FDIC has announced that its Board has approved the creation of two new, independent offices, reporting directly to the Board of Directors, to handle claims of sexual harassment, discrimination, and other forms of interpersonal misconduct, as well as claims of retaliation.

The FDIC’s new Office of Professional Conduct (OPC) will intake, investigate, and report on complaints of harassment and interpersonal misconduct, and will determine and enforce discipline against anyone violating the FDIC’s anti-harassment or anti-retaliation policies.

The FDIC’s new Office of Equal Employment Opportunity (OEEO) will intake, investigate, and report complaints of discrimination under the laws enforced by the Equal Employment Opportunity Commission.

The FDIC Board adopted these fundamental structural changes to the agency’s current framework for handling claims of harassment, discrimination, other interpersonal misconduct, and retaliation following feedback from FDIC employees, as well as recommendations in an independent third-party review of the agency’s workplace culture. The new offices approved will have separate functions because each must operate under distinct sets of law and policy.

The work of the OPC will be driven by the FDIC’s Anti-Harassment Program Directive and will serve as a single point of entry for employee complaints of harassment and other interpersonal misconduct. The OEEO will operate under several statutes enforced by the Equal Employment Opportunity Commission by serving as a single point of entry for employment discrimination claims.

Under the FDIC’s new structure, the OPC and the OEEO will be led by new corporate officers, appointed by the Board, who will report directly to the FDIC Board of Directors.

The Treasury Department reported on Friday that OFAC has designated twelve individuals in leadership roles at AO Kapersky Lab.

On Thursday, the Department of Commerce issued a final determination under Executive Order 13873 prohibiting Kaspersky Lab, Inc., its affiliates, subsidiaries and parent companies directly or indirectly from providing anti-virus software and cybersecurity products or services in the United States or to U.S. persons. Commerce reached this determination after an investigation found transactions involving the products and services of Kaspersky Lab, Inc. and its corporate family pose unacceptable risk to U.S. national security or the safety and security of U.S. persons, as outlined in E.O. 13873.

In addition, the Department of Commerce has designated AO Kaspersky Lab and OOO Kaspersky Group (Russia), and Kaspersky Labs Limited (United Kingdom) on the Entity List for their cooperation with Russian military and intelligence authorities in support of the Russian government’s cyber intelligence objectives. These activities are contrary to U.S. national security and foreign policy interests.

For the names and identification information of the designated parties, see the June 21, 2024, BankersOnline OFAC Update.

Yesterday, the IRS announced it has issued Notice 2024-55, which provides guidance on exceptions to the additional tax when taking early permissible retirement plan distributions for emergency personal expenses and for victims of domestic abuse.

The notice also provides guidance to applicable eligible retirement plans on the plan requirements relating to emergency personal expense distributions and domestic abuse victim distributions, including that it is optional for a plan to permit these types of distributions.

In addition, the notice provides that the Department of the Treasury and the IRS anticipate issuing regulations on the 10% additional tax (including the exceptions to the 10% additional tax) and request comments relating to the notice. Comments are specifically requested on repayments of certain distributions permitted under section 72(t)(2).

The FDIC Board yesterday announced it has approved a final rule to strengthen resolution planning for insured depository institutions (IDIs) with at least $50 billion in total assets. After careful consideration of comments received, the FDIC issued a final rule that incorporates several changes from the agency’s proposed rule published in September of 2023.

Under the rule announced yesterday, the FDIC will require large banks with total assets of at least $100 billion to submit comprehensive resolution plans that meet enhanced standards to support the FDIC’s ability to undertake an efficient and effective resolution under the Federal Deposit Insurance Act should such an institution fail.

The rule will require IDIs with total assets of at least $50 billion but less than $100 billion to submit more limited “informational filings” to assist in their potential resolution. The agency will not require these institutions to develop a resolution strategy and related valuation information as part of their submissions. These institutions are also exempt from submitting certain strategy-related content requirements regarding the institution’s franchise components.

The new rule strengthens the existing IDI resolution planning framework under 12 CFR § 360.10 by requiring a full resolution submission from most covered IDIs every three years with limited supplements filed in the off years. Covered IDIs affiliated with U.S. global systemically important banking organizations must file a full resolution submission every two years.

The final rule will take effect on October 1, 2024, and the first submissions are expected next year.

• Fact sheet
• FIL-34-2024
• Statement by Acting Comptroller of the Currency Michael J. Hsu
• Statement by CFPB Director Rohit Chopra
• Publication update: Published at 89 FR 56620 in the 7/9/2024 Federal Register

FinCEN has issued a FIN-2024-A002) to alert U.S. financial institutions to new trends in the illicit fentanyl supply chain and urge vigilance in identifying and reporting suspicious activity associated with Mexico-based transnational criminal organizations and their illicit procurement of fentanyl precursor chemicals and manufacturing equipment from People’s Republic of China-based suppliers. The supplemental advisory builds off FinCEN’s 2019 advisory with new typologies and red flags to identify and report suspicious transactions, and fulfills the requirement in Section 3202 of the recently enacted FEND Off Fentanyl Act.

• FinCEN news release
• Treasury Department news release
• Remarks by Treasury Secretary Janet L. Yellen

Yesterday, Treasury Secretary Janet L. Yellen announced that OFAC had sanctioned eight Mexico-based targets affiliated with La Nueva Familia Michoacana drug cartel for trafficking fentanyl, cocaine, and methamphetamine into the United States. In addition to narcotics trafficking, La Nueva Familia Michoacana smuggles migrants from Mexico into the United States.

Concurrently, Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a Supplemental Advisory to highlight critical new information to help U.S. banks and other financial institutions guard against activity associated with the illicit fentanyl supply chain. The advisory includes new trends and red flags that can be indicators of activity associated with the procurement of precursor chemicals and manufacturing equipment used for the synthesis of illicit fentanyl and other synthetic opioids. Reporting from financial institutions of suspected financial transactions involving illicit fentanyl and narcotics trafficking plays a key role in law enforcement investigations and Treasury’s sanctions efforts globally.

For the names and identification information of the designated parties, see the June 20, 2024, BankersOnline OFAC Update.

The OCC yesterday announced its approval of a final rule to implement quality control standards for automated valuation models used by mortgage originators and secondary market issuers in valuing residential real estate collateral securing mortgage loans.

The rule was reportedly also approved yesterday by the Board of the FDIC. It is to be jointly issued by the OCC, Federal Reserve Board, FDIC, NCUA, CFPB, and the Federal Housing Finance Agency following approval by each of the agencies. It will be effective at the start of the first calendar quarter following the date that is 12 months after the rule is published in the Federal Register

The FDIC has updated its Consumer Compliance Examination Manual. The June 2024 updates were made to sections II-14.1 (Violations Codes), IV-1.1 (Truth in Lending Act), and XI-1.1 (Community Reinvestment Act).

FinCEN recently issued a report of efforts through May 2024 to educate small businesses and other key stakeholders about new beneficial ownership reporting requirements. The report also included a list of upcoming events at which FinCEN representatives will provide information on the regulation.

The CFPB on Tuesday announced it had filed a proposed stipulated order, which, if entered by the court, would impose injunctive relief designed to prevent Freedom Mortgage from violating the law in the future, including requirements to regularly audit, test, and correct the company’s HMDA data. It would also require Freedom to pay a $3.95 million civil money penalty.

In October 2023, the CFPB sued Freedom Mortgage, a nonbank mortgage company headquartered in Boca Raton, Florida, for violating both the Home Mortgage Disclosure Act (HMDA) and a 2019 CFPB order.The CFPB proposed the order because Freedom Mortgage has submitted incorrect mortgage data in violation of HMDA, the 2019 order, and the Consumer Financial Protection Act. Freedom Mortgage’s HMDA data submission for 2020 contained widespread errors across numerous data fields because of systemic problems with its compliance management systems. The company’s HMDA violations occurred while Freedom Mortgage was subject to the 2019 law enforcement order.

On Tuesday, the CFPB ordered a reverse mortgage servicing operation to stop illegal activities that harmed older homeowners and caused them to fear losing their homes. The CFPB found that the customer service operation of Sutherland Global, its subsidiaries Sutherland Government Solutions and Sutherland Mortgage Services, and NOVAD Management Consulting had inadequate resources and staffing to handle as many as 150,000 borrowers. This caused systematic failures to respond to thousands of homeowner requests for assistance, and caused financial harm to borrowers, including losing out on home sales and paying unnecessary costs.

The orders permanently ban Sutherland Global, Sutherland Government Solutions, and NOVAD from engaging in reverse mortgage activities, imposes strict compliance requirements on future reverse mortgage activities of Sutherland Mortgage Services, requires the Sutherland companies to pay $11.5 million in redress to affected consumers, and requires all companies to pay a civil penalty of approximately $5 million, which will be deposited in the CFPB’s victims relief fund.

Sutherland and NOVAD formed a loan servicing operation to service reverse mortgages on behalf of the Department of Housing and Urban Development. The loan servicing operation existed from 2014 through 2022, and was responsible for servicing reverse mortgages for as many as 150,000 older borrowers every year.

Under federal law, a servicer must respond to consumer requests for information about their loan in a timely manner. That requirement is important to protect reverse mortgage borrowers, who remain responsible for property taxes, insurance, and other applicable fees and assessments. However, many borrowers could not get in contact with anyone at the loan servicing operation. In fact, the companies systematically failed to respond to thousands of homeowner requests for loan payoff statements, short sales, deeds-in-lieu of foreclosures, lien releases, and requests for general information. The companies allowed problems to fester to critical points, which resulted in borrowers losing out on home sales, paying unnecessary costs, and fearing foreclosure.

The CFPB found that Sutherland and NOVAD violated both the Consumer Financial Protection Act and the Real Estate Settlement Procedures Act. Specifically, the companies harmed older adults with a reverse mortgage by failing to communicate with homeowners, thus preventing homeowners from being able to prove occupancy, obtain loan payoff statements, and complete alternatives to foreclosure. The CFPB also found that the companies sent false repayment letters to older adult homeowners stating that their reverse mortgage loans were due and must be paid within 30 days due to a default condition, when no such trigger event had occurred. The companies would then improperly ignore attempts by reverse mortgage borrowers to address and correct the “due and payable” letters.

• Consent order against Sutherland
• Consent order against NOVAD