All in Regulatory Update

FinCEN Fines Bitcoin "Mixer" for BSA/AML Deficiencies

Adam Witmer
BSA, Regulatory Update

On 10/19/2020, the Financial Crimes Enforcement Network (FinCEN) announced a $60 million civil money penalty (CMP) against Larry Dean Harmon and two convertible virtual currency businesses he founded. In their release, FinCEN explained that Harmon’s two businesses, Helix and Coin Ninja, were convertible virtual currency “mixers,” or “tumblers” and violated the Bank Secrecy Act and its implementing regulations. Specifically, FinCEN states that Harmon and his businesses operated as an unregistered money transmitting business. In doing so, Harmon and his businesses operated “as a bitcoin mixer, or tumbler, and advertised its services in the darkest spaces of the internet as a way for customers to anonymously pay for things like drugs, guns, and child pornography.” Mr. Harmon is also currently being prosecuted in the U.S. District Court for the District of Columbia on charges of conspiracy to launder monetary instruments and the operation of an unlicensed money transmitting business.

CFPB Releases New HMDA Reference Chart

Adam Witmer
HMDA, Regulatory Update

On 10/15/2020, the CFPB released a new HMDA reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for HMDA Data Collected in 2021.” In the chart, the CFPB explains that the chart is intended to be used as a reference for data points that must be collected, recorded, and reported under HMDA rules. The chart includes applicable regulation and commentary sections as well as parts of the Filing Instruction Guide. In addition, the chart helps to explain when to report not applicable or exempt, including the codes used for reporting not applicable or exempt.

New FinCEN Advisory on Human Trafficking

Adam Witmer
BSA, Regulatory Update

On 10/15/20, FinCEN released advisory FIN-2020-A008 - which is titled “Supplemental Advisory on Identifying and Reporting Human Trafficking and Related Activity” - to “help save lives, and to protect the most vulnerable in our society from predators and cowards who prey on the innocent and defenseless for money and greed.” This advisory provides new information relating to human trafficking and supplements FinCEN’s 2014 Guidance on Recognizing Activity that May be Associated with Human Smuggling and Human Trafficking - Financial Red Flags. The advisory provides an overview of human trafficking, new typologies of human trafficking, behavioral and financial red flag indicators of human trafficking, case studies, and guidance to U.S. financial institutions. When reporting suspicious activity related to this advisory, FinCEN requests that financial institutions include the key term “HUMAN TRAFFICKING FIN-2020-A008” in SAR field 2 (Filing Institution Note to FinCEN) to indicate a connection between the suspicious activity being reported and the activities highlighted in the advisory.

OCC Fines USAA $85 Million

Adam Witmer
Regulatory Update

On 10/14/2020, the Office of the Comptroller of the Currency (OCC) fined USAA, Federal Savings Bank $85 million due to failures in their compliance risk management program as well as their information technology risk governance program. In their release, the OCC explains that these deficiencies resulted in violations of law, including but not limited to violations of the Military Lending Act and the Servicemembers Civil Relief Act. This civil money penalty appears to be related to the January 2019 Consent Order with the OCC.

CFPB Issues Consent Order Against Nissan for Debt Collection Practices

Adam Witmer
Regulatory Update, UDAAP

On 10/13/2020, the CFPB issued a consent order against Nissan Motor Acceptance Corporation for a number of issues relating to debt collection and repossession practices. In their release, the CFPB found that Nissan:

  • wrongfully repossessed vehicles;

  • kept personal property in consumers’ repossessed vehicles until consumers paid a storage fee;

  • deprived consumers paying by phone of the ability to select payment options with significantly lower fees; and,

  • in its loan extension agreements, made a deceptive statement that appeared to limit consumers’ bankruptcy protections.

In their release, the CFPB asserts that these practices resulted in UDAAP violations and the consent order requires Nissan to provide up to $1 million of cash redress to affected consumers, credit any outstanding account charges associated with wrongful reposession, and to pay a CMP of $4 million.

CIP Exemption for Premium Finance Lending

Adam Witmer
Regulatory Update

On 10/5/2020, the joint agencies (OCC, FDIC, NCUA, Federal Reserve, and FinCEN) issued an order to exempt CIP (customer identification program) requirements for loans extended by banks to facilitate purchases of property and casualty insurance policies. This order comes after a group of banks jointly submitted letters in 2016 and 2017 requesting an exemption or interpretation regarding the application of the CIP rules to insurance premium finance lending. These letters asserted that CIP was not needed for insurance premium finance lending because this activity presents a very low risk of money laundering because of the purpose for which the loans are extended and the limitations on the ability of a customer to use such funds for any other purpose. On 9/27/18, an initial exemption was granted by the joint agencies specifically for commercial customers. This new order extends the exemption to all customers, not just commercial customers.

SBA Releases Simpler PPP Loan Forgiveness Application

Adam Witmer
Regulatory Update

On 10/8/20, the Small Business Administration (SBA) released a simpler loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. In a release by the US Department of the Treasury, it was explained that this action “streamlines the PPP forgiveness process to provide financial and administrative relief to America’s smallest businesses while also ensuring sound stewardship of taxpayer dollars.”

Citibank CMP for Risk Management Deficiencies

Adam Witmer
Compliance Management, Regulatory Update

On October 7, 2020, the Office of the Comptroller of the Currency (OCC) announced that they had assessed a $400 million civil money penalty (CMP) against Citibank due to deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls. In their release, the OCC explained that these measure were taken “based on the bank’s unsafe or unsound banking practices for its long-standing failure to establish effective risk management and data governance programs and internal controls.”

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