Compliance Update, Fourth Quarter 2020

By October 2, 2020Industry Updates

Financial Crimes Enforcement Network (FinCEN) Advance Notice of Proposed Rulemaking (ANPRM) to Amend Anti-Money Laundering (AML) Program Requirements

On September 17, 2020, FinCEN published an ANPRM that seeks public comment on potential amendments to AML requirements. The amendments would seek to clarify that the purpose of an AML program is to assess and manage risk, including consideration of AML priorities issued by FinCEN that are consistent with the proposed amendments; provide for compliance with Bank Secrecy Act (BSA) requirements; and provide for the reporting of information, with a high degree of usefulness to government authorities. The notice includes 11 questions for which FinCEN is seeking public opinion as part of the rulemaking, with comments to be received by November 16, 2020.

https://www.federalregister.gov/documents/2020/09/17/2020-20527/anti-money-laundering-program-effectiveness

Federal Reserve Board ANPRM on Community Reinvestment Act (CRA) Regulation Modernization

On September 21, 2020, the Federal Reserve Board issued an ANPRM on an approach to modernize regulation that implements the CRA. The proposed rulemaking looks to strengthen the CRA by clarifying and tailoring it to reflect the current banking environment. Previously, the Office of the Comptroller of the Currency (OCC) published its final rule to modernize CRA regulations on June 5, 2020, with an October 1, 2020, effective date (compliance date of January 1, 2023). The Federal Deposit Insurance Corporation (FDIC) did not join the OCC in issuing a final rule at the time and has not yet published a final rule.

https://www.federalreserve.gov/aboutthefed/boardmeetings/files/cra-fr-notice-20200921.pdf

Same Day Automated Clearing House (ACH) Resources and Upcoming Changes

On September 18, 2020, the Federal Reserve posted a notice regarding the upcoming new processing window for Same Day ACH. As part of the Same Day ACH rules announced in September 2018, a third settlement window will be open for eligible items. The third settlement deadline will be 4:45 p.m. ET and settlement at 6 p.m. ET. Currently, the final transmission deadline is 2:45 p.m. ET, with settlement at 5:00 p.m. ET. Resources have been updated to reflect the upcoming change.

https://www.frbservices.org/news/communications/091820-ach-same-day-ach-expansion-resources.html

OCC Bulletin on Credit Risk: Risk Management of Loan Purchase Activities

On September 10, 2020, the OCC issued Bulletin 2020-81 to inform banks of sound risk management principles regarding loan purchase activities. The highlights of the bulletin include guidance on (1) strategic plan and risk appetite, (2) lending policies and procedures, and (3) credit administration (due diligence and independent credit analysis, additional considerations for loan portfolio and pool purchases, and recourse arrangements).

https://www.occ.gov/news-issuances/bulletins/2020/bulletin-2020-81.html

Statement by FinCEN Regarding Unlawfully Disclosed Suspicious Activity Reports (SARs)

On September 1, 2020, FinCEN issued a statement advising that it was aware that various media outlets intended to publish a series of articles based on unlawfully disclosed SARs, as well as other sensitive government documents, from several years ago. As part of the statement, FinCEN reiterated that the unauthorized disclosure of SARs is a crime that can impact the national security of the United States, compromise law enforcement investigations, and threaten the safety and security of the institutions and individuals who file such reports.

https://www.fincen.gov/news/news-releases/statement-fincen-regarding-unlawfully-disclosed-suspicious-activity-reports

Home Mortgage Disclosure Act Filing Instructions Guide (FIG) and Supplemental Guide for 2021

On August 21, 2020, the Consumer Financial Protection Bureau (CFPB) released the 2021 FIG and Supplemental Guide for quarterly filers.

https://ffiec.cfpb.gov/

Joint Statement on Due Diligence Requirements for Customers Who May Be Considered Politically Exposed Persons (PEPs)

On August 21, 2020, an interagency statement was issued regarding expectations for performing additional due diligence for customers who may be considered PEPs. The term PEPs is commonly used in the financial industry to refer to foreign individuals who are or have been entrusted with a prominent public function, as well as their immediate family members and close associates. The statement clarifies that, while banks must adopt appropriate risk-based procedures for conducting customer due diligence (CDD), the CDD rule does not create a regulatory requirement, and there is no supervisory expectation for banks to have unique, additional due diligence steps for customers who are considered PEPs.

https://www.fdic.gov/news/financial-institution-letters/2020/fil20078.html

Payday Lending Rule Frequently Asked Questions (FAQs)

On August 11, 2020, the CFPB issued FAQs relating to the 2017 Payday Lending Rule. The compliance date for the rule’s mandatory underwriting provisions are effective November 19, 2020 (delayed from original date of August 19, 2020). Also, on July 7, 2020, the CFPB issued a final rule to revoke certain provisions of the 2017 rule. The FAQs issued are intended to be a Compliance Aid for the rule.

https://www.consumerfinance.gov/policy-compliance/guidance/consumer-lending-resources/payday-lending-rule/payday-lending-rule-faqs/

Joint Statement on Enforcement of BSA/AML Requirements

The joint statement does not create new expectations or standards but describes circumstances in which an agency will issue a mandatory cease and desist order under section 8(s) of the Federal Deposit Insurance Act to address noncompliance with BSA/AML requirements.

https://www.fdic.gov/news/financial-institution-letters/2020/fil20076.html

FAQs Regarding CDD Requirements for Covered Financial Institutions

On August 3, 2020, FinCEN responded to three additional FAQs regarding CDD requirements. FAQs were previously issued on July 19, 2016, and April 3, 2018. The new FAQs and responses address (1) customer information—risk-based procedures (expectations regarding the collection of information about expected activity, performance of media or news searches on all parties, and collection of information on underlying transacting parties); (2) customer risk profile (usage of a specific method or categorization to risk rate customers, and should certain “high-risk” products or customer types be automatically categorized); and (3) ongoing monitoring of the customer relationship (expectations regarding updating customer information on a specific schedule).

https://www.fincen.gov/sites/default/files/2020-08/FinCEN%20Guidance%20CDD%20508%20FINAL_2.pdf

Annual Threshold Adjustments for Regulation Z (for 2021)

On July 17, 2020, the CFPB issued its final rule (published in the Federal Register on August 19, 2020), adjusting certain thresholds relating to credit cards, the Home Ownership and Equity Protection Act (HOEPA), and qualified mortgages, to be effective January 1, 2021. The threshold adjustments include thresholds relating to minimum interest charges disclosed for open-end consumer credit plans (unchanged), credit card penalty fees (unchanged), HOEPA loan amount and points-and-fee triggers (increased), and new dollar amount thresholds for qualified mortgages under the ability to repay rule.

https://files.consumerfinance.gov/f/documents/cfpb_truth-in-lending-reg-z-annual_threshold-adjustment_2020-07.pdf

Advisory on Cybercrime and Cyber-Enabled Crime Exploiting the COVID-19 Pandemic

On July 30, 2020, FinCEN issued an advisory to alert all financial institutions of the potential for cybercrime and cyber-enabled crime to occur during the COVID-19 pandemic. The advisory is intended to aid financial institutions in detecting, preventing, and reporting potential COVID-19-related criminal activity. The advisory also includes a number of red flags for institutions to be aware of that relate to the “Targeting and Exploitation of Remote Platforms and Processes”; “Phishing, Malware, and Extortion”; and “Business Email Compromise Schemes.” The guidance also includes information on related SAR filing instructions, including the completion of certain fields to reference the advisory within the filing.

https://www.fincen.gov/sites/default/files/advisory/2020-07-30/FinCEN%20Advisory%20Covid%20Cybercrime%20508%20FINAL.pdf

If you have questions about this update, please contact Tim Schofer at tschofer@srsnodgrass.com, Frank Antiga at fantiga@srsnodgrass.com, or Michael Caparoula at mcaparoula@srsnodgrass.com or 724-934-0344.