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COMPLIANCE MONTHLY
NEWSLETTER
Compliance Monthly is intended to keep you informed of regulatory changes in advance of their effective date so your institution can have the necessary policies, procedures and processes in place to be compliant at the time of enactment. Information contained in Compliance Monthly is not intended to provide specific advice and guidance. You should consult your own professional services provider in connection with matters affecting your own interests.
June 2019
Table of Contents ACCUMULATE KNOWLEDGE, VALUE, RESOURCES
Focus of the Month 02
Regulator Roundup 03
04 Finalized Rules 05
04 Other Compliance News 08
04 Recommended Actions to Take 12
04
Proposed Rules 07
04
Of the Month
Focus
A Framework for OFAC Compliance Commitments The Department of the Treasury’s Office of Foreign Assets Control (OFAC) is published A Framework for OFAC Compliance Commitments in order to strongly encourage organizations subject to U.S. jurisdiction, as well as foreign entities that conduct business in or with the United States, U.S. persons, or using U.S.-origin goods or services, to employ a risk-based approach to sanctions compliance by developing, implementing, and routinely updating a sanctions compliance program (SCP). While each risk-based SCP will vary depending on a variety of factors—including the company’s size and sophistication, products and services, customers and counterparties, and geographic locations—each program should be predicated on and incorporate at least five essential components of compliance: (1) management commitment; (2) risk assessment; (3) internal controls; (4) testing and auditing; and (5) training. OFAC developed this framework in its continuing effort to strengthen sanctions compliance practices across the board and to underline its commitment to engage with the private sector to further promote understanding of, and compliance with, sanctions requirements. The document also outlines how OFAC may incorporate these components into its evaluation of apparent violations and resolution of investigations resulting in settlements. Finally, the document includes an appendix that offers a brief analysis of some of the root causes of apparent violations of U.S. economic and trade sanctions programs OFAC has identified during its investigative process. Source: U.S. Department of the Treasury, May 2, 2019
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Webinar
Upcoming
The Institute of International Bankers (IIB) and Accume Partners will co-host a webinar on June 6, 2019 on AML Model Validation and Risk Management. The webinar will offer practical solutions to common challenges in the following areas: • Model Governance; • Model Design; • Data Quality; • Model Output; • Ongoing Validation/Testing; • Regulatory Considerations; • Coordination with multiple parties; and • Model Validation Expertise. More information to follow!
Regulator Roundup
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Regulator Roundup
House Financial Services Committee Releases AML Reform Bill
The House Financial Services Committee released three proposed bills to codify many of the reform ideas that have arisen in an ongoing conversation among financial agencies, law enforcement, financial institutions, and commentators regarding the Bank Secretary Act (“BSA”) and Anti-Money-Laundering (“AML”) and Combating the Financing of Terrorism (“CFT”) laws. Key reform topics include the following:
• Making several changes to the BSA/AML enforcement regime
• Creating international and domestic liaisons to improve BSA/AML collaboration
• Developing several new initiatives to facilitate information sharing among financial institutions and between regulators, law enforcement, and the industry
• Implementing initiatives to encourage innovation to improve the efficacy and efficiency of BSA/AML compliance requirements
• Balancing its proposed measures to increase information sharing and collaboration with additional privacy protections
Under a related Bill (H.R. 2513), an amendment was offered would require most corporations and limited liability corporations to disclose information regarding their beneficial owners to FinCEN at the time the company is formed.
Source: May 8, 2019, H.R. 2514, 2513
Finalized Rules
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Finazlied Rules
OCC Issues Final Rule to Enhance Business Flexibility for Federal Savings Associations The Office of the Comptroller of the Currency (OCC) has issued a final rule that provides more business flexibility to federal savings associations. The final rule implements section 206 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The Act requires the OCC to issue regulations to allow federal savings associations with total consolidated assets of $20 billion or less as of December 31, 2017, to elect to operate with national bank powers. Federal savings associations that make the election generally will have the same rights and privileges as a national bank and will be subject to the same duties, restrictions, penalties, liabilities, conditions, and limitations that apply to national banks. The final rule aims to provide federal savings associations with additional flexibility to adapt to new economic conditions and business environments without having to change their charters. The final rule becomes effective on July 1, 2019. Source: OCC, CFR Part 101, July 1, 2019 (Effective date) FTC Amends Rule Providing Model Forms and Disclosures Under FCRA The Federal Trade Commission has approved publication of a Federal Register notice announcing the rescission of several model forms and disclosures under the Fair Credit Reporting Act (FCRA). The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) transferred rulemaking authority under several portions of the FCRA to the Consumer Financial Protection Bureau (CFPB). The Commission retained seven rules issued under the FCRA, as amended, that continue to apply to motor vehicle dealers. Source, FTC, May 23, 2019, 16 CFR Parts 640, 680, and 698
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Proposed Rules
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Proposed Rules OCC Solicits Public Comment on Proposed Innovation Pilot Program
The Office of the Comptroller of the Currency (OCC) opened a 45-day public comment period on a proposed Innovation Pilot Program (the program). The program would be voluntary and designed to provide eligible entities with regulatory input early in the testing of innovative activities that could present significant opportunities or benefits to consumers, businesses, financial institutions, and communities. The program would build on the OCC’s innovation initiatives to date and complement the agency’s vision to add value through constructive, proactive supervision and to serve as a valuable resource to industry stakeholders. Entities eligible for the proposed program would be OCC-supervised financial institutions, including those engaging a third party to offer the innovative product, service, or process. Entities may propose a pilot individually or as a collaborative effort such as a consortium or utility. Comments on the proposed program should be sent to [email protected] by June 14, 2019. Source, OCC, April 30, 2019 (NR 2019-42) FTC Extends Comment Deadline on Proposed Changes to Safeguards Rule The Federal Trade Commission has agreed to extend by 60 days the deadline for the public to submit comments on proposed changes to the Safeguards Rule, which requires financial institutions to develop, implement, and maintain a comprehensive information security program. The FTC announced in March that it was seeking comment on proposed changes to the Gramm-Leach-Bliley Act’s Safeguards Rule as well as the Privacy Rule, which requires a financial institution to inform customers about its information-sharing practices and allow customers to opt out of having their information shared with certain third parties. The deadline to submit comments on the proposed changes to the Safeguards Rule has been extended to August 2, 2019. Comments on the proposed changes to the Privacy Rule are due on June 3, 2019, the original comment deadline. Source, FTC, May 21, 2019, 16 CFR Part 314 FTC Announces First Actions Exclusively Enforcing the Consumer Review Fairness Act The Federal Trade Commission has issued three separate proposed administrative complaints and orders enforcing the Consumer Review Fairness Act (CRFA), which prohibits businesses from using form contract provisions that bar consumers from writing or posting negative reviews online, or threatening them with legal action if they do. These are the first Commission actions exclusively focused on enforcing the CRFA. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov. Source: FTC, May 8, 2019
Other Compliance News
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Other Compliance News OCC Report Highlights Key Risks for Federal Banking System The Office of the Comptroller of the Currency (OCC) today reported credit, operational, compliance, and interest rate risks are key themes for the federal banking system in its Semiannual Risk Perspective for Spring 2019. Highlights from the report include:
• Credit quality is strong when measured by traditional performance metrics, but successive years of growth, incremental easing in underwriting, risk layering, and building credit concentrations result in accumulated risk in loan portfolios.
• Operational risk is elevated as banks adapt to a changing and increasingly complex operating environment. Key drivers for operational risk include persistent cybersecurity threats as well as innovation in financial products and services and increasing use of third parties to provide and support operations that are not effectively understood, implemented, and controlled.
• Compliance risk related to Bank Secrecy Act/Anti-Money Laundering (BSA/AML) is high as banks remain challenged to effectively manage money laundering risks.
• Interest rate risk and the related liquidity risk implications pose potential challenges to earnings given the uncertain rate environment, competitive pressures, changes in technology, and untested depositor behavior.
The report also highlights financial innovation and related impacts to strategic risk. The report covers risks facing national banks and federal savings associations based on data as of December 31, 2018. The report presents information in five main areas: the operating environment, bank performance, special topics in emerging risk, trends in key risks, and supervisory actions. It focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public. Source: OCC Semiannual Risk Perspective for Spring 2019, May 20, 2019 (NR 2019-49) Senate Banking Chair Crapo Urges Agencies to Pay Further Attention to FBO Tailoring
In his opening statement at a May 15th hearing with financial regulators, Senate Banking Committee Chairman Mike Crapo
(R-ID) said some aspects of recent rulemaking proposals "merit further attention," including whether regulations applying
to the U.S. operations of foreign banking organizations are tailored to their risk profile. The agencies also should "consider
the existence of home country regulations that apply on a global basis," Senator Crapo said. During the hearing, Senator
Pat Toomey (R-PA) noted the significant contributions that foreign banks make to the economy of his state. Directing a
comment to Fed Vice Chairman Randy Quarles, one of the witnesses at the hearing, Sen. Toomey said: "One of my
concerns is that two otherwise very similar banks -- similar in size, similar in the role that they play -- one owned by a
domestic -- through a domestic holding company, another owned through an IHC by virtue of its foreign ownership might
be subject to different regulatory regimes. And I'm concerned about creating an unlevel playing field that would ultimately
diminish competition, which I think is very good for my constituents." Vice Chairman Quarles acknowledged that "we are
obliged by law to consider national treatment, giving them a level playing field as we construct our regulatory positions."
Also testifying at the hearing were Comptroller of the Currency Joseph Otting, FDIC Chairman Jelena McWilliams, and
NCUA Chairman Rodney Hood.
Source: IIB Weekly Bulletin, May 20, 2019
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Other Compliance News Updated FinCEN Advisory on Continued Corruption in Venezuelan The Financial Crimes Enforcement Network (FinCEN) today issued an updated advisory to alert financial institutions of continued widespread public corruption in Venezuela and the methods Venezuelan senior political figures and their associates may use to move and hide proceeds of their corruption. In addition to outlining the corrupt looting of Venezuela’s government-sponsored food distribution program, the advisory provides and updates a number of financial red flags to assist in identifying and reporting suspicious activity that may be indicative of corruption. Source: FinCEN, May 3, 2019 Revised Comptroller's Handbook Booklet and Rescissions The Office of the Comptroller of the Currency issued today the "Real Estate Settlement Procedures Act" (RESPA) booklet of the Comptroller's Handbook. This revised booklet provides guidance and procedures to examiners in connection with changes made by the Consumer Financial Protection Bureau to Regulation X (12 CFR 1024), which implements RESPA. OCC, Bulletin 2019-22, May 7, 2019
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Recommended Actions to Take
Recommended Actions to Take
➢ Review the Department of the Treasury’s Office of Foreign Assets Control (OFAC) A Framework for OFAC Compliance Commitments and evaluate applicability to your organization.
➢ Monitor the House Financial Services Committee’s efforts to make sweeping changes in the area of BSA/AML reform.
➢ Submit your comments on the Federal Trade Commission’s proposed changes to the Safeguards Rule by the August 2, 2019 deadline. Comments on the proposed changes to the Privacy Rule are due on June 3, 2019.
➢ Review the Federal Trade Commission’s changes to model forms and disclosures under the Fair Credit Reporting Act (FCRA) and the impact to your institution.
➢ Submit your comments to the Office of the Comptroller of the Currency’s (OCC) proposed Innovation Pilot Program by June 14, 2019.
➢ Review the Office of the Comptroller of the Currency’s (OCC) Semiannual Risk Perspective for Spring 2019 and assess overall impact to your organization.
➢ Review FBO Tailoring proposed rule and the potential impact to U.S. operations of foreign banking organizations.
If you have questions about any of the above recommendations,
or about their implementation, feel free to reach out to Accume
for additional information.
E
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Contact Us Accume Partners
www.accumepartners.com
Joseph Chisolm Senior Director 646-872-1967
Trusted Advisor Specialized Resources: Big 4, Industry Cost-Effective Agile
Janet Golonka Senior Director 724-914-5905