Financial Regulatory Forum

U.S. agents scramble to grasp how Mexican cartels launder money via L.A. fashion district

Federal agents hope documents and electronic data seized during raids on the Los Angeles fashion district last month and cash-transaction reports that businesses in the zone are now required to file will help clarify how Mexico’s drug cartels are using international trade to launder money, law enforcement sources say.

The ability to generate new intelligence from documents and human sources may well dictate – at least in the short term – the degree to which U.S. authorities can effectively combat Mexican cartels by hitting them in their pocketbooks.  (more…)

Former MoneyGram compliance chief facing potential record fine regarded as anti-laundering innovator

In the late 1990s former MoneyGram International Inc executive Thomas Haider was a compliance leader pushing the money transfer industry to do more to fight financial crime, convincing his and other firms to voluntarily police transactions for illicit activity and report to authorities, a former official with the Treasury Department’s anti-money laundering bureau says.

A decade and a half later, six years after Haider left his post as MoneyGram’s compliance chief, Treasury’s Financial Crimes Enforcement Network (FinCEN) has threatened him with an unprecedented, multi-million dollar civil penalty. It has said he is personally liable for the money transfer giant’s failures to do what was required under the Bank Secrecy Act (BSA), the U.S. anti-money laundering (AML) law, to keep criminals out of the U.S. financial system during the mid-to-late 2000s, sources say. (more…)

Bankers say “derisking” underway amid sanctions crackdown; that’s the point, U.S. regulator says

A process of “derisking” is underway by financial firms exiting sectors that represent compliance landmines, bankers said on Tuesday, but a top U.S. sanctions enforcer said that is sometimes just the right move.

“It is not at all uncommon for me to hear that a compliance overhaul was done and certain customers, certain lines of activity were deemed too risky to persist. That may be exactly the right response to a situation where the risk outweighs the benefit,” said Adam Szubin, director of the U.S. Treasury’s Office of Foreign Assets Control (OFAC), the lead agency for the enforcement of U.S. financial sanctions. (more…)

CFTC’s swap dealer rule for compliance chiefs: many questions in first “annual reports”

By Henry Engler, Compliance Complete

NEW YORK, Oct. 1, 2014 (Thomson Reuters Accelus) - New rules governing swap dealers and the requirements for dedicated chief compliance officers are now more than a year in effect, and a new review of the so-called “annual reports” that dealers must submit to the Commodities Futures Trading Commission suggest there are still lingering questions over the roles and responsibilities of CCOs, particularly for non-U.S. dealers.

The review, published by the law firm Wilmer Hale , found that as of May 31, 2014, 105 entities were provisionally registered as swap dealers, and therefore subject to the CFTC’s CCO rule, which came into force in December 2012. The study noted that of the total population, 53 were located in the United States, with the rest in other jurisdictions, including the European Union, Canada, Australia, Hong Kong, Japan, Mexico, Singapore, and Switzerland.  (more…)

U.S. bank liquidity ratio rule: more lenient than proposed, but tougher than Basel

By Bora Yagiz, Compliance Complete

NEW YORK, Sept. 30, 2014 (Thomson Reuters Accelus) - Large banks may have to make small modifications to their asset mix, raise more equity and ramp up their operational systems in response to federal agencies’finalized rule on liquidity coverage ratio (LCR) . It is the first quantitative U.S. regulatory standard for defining liquidity and establishing a minimum level of liquidity, and is part of the enhanced prudential standard rules of the Dodd-Frank Act.

This rule put forth by three federal agencies concurrently –the Federal Reserve Bank, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC)– is one of the two creations of Basel Committee on Banking Supervision on liquidity metrics, and flows from its revised liquidity framework.  (more…)

Safeguard customers’ personal information; regulators are watching

By Julie DiMauro, Compliance Complete

NEW YORK, Sept. 19, 2014 (Thomson Reuters Accelus) - In a sanction that can serve as a wake-up to the financial industry, Verizon Communications last week agreed to pay $7.4 million to end an investigation that found it failed to tell two million new customers about their privacy rights before using their information for marketing purposes, the Federal Communications Commission said.

The privacy probe highlights the vigilance that must be paid to consumer privacy rights to meet regulators’ requirements. Although the financial industry mostly answers to different regulators, it too is subject to laws and regulations protecting the privacy of its customers. (more…)

Authorities seek more AML scrutiny of L.A. fashion district as raid nets cartel-linked targets

By Brett Wolf, Compliance Complete

LOS ANGELES/NEW YORK, Sept. 17, 2014 (Thomson Reuters Accelus) - Roughly 1,000 law enforcement agents poured into the Fashion District in downtown Los Angeles Wednesday morning to raid shops and arrest nine people suspected of using businesses to launder large sums of cash generated by drug trafficking and other illicit activity, the U.S. Justice Department said. The money laundering problem in the area has prompted authorities to request a formal designation subjecting it to greater enforcement scrutiny. (more…)

Standard Chartered’s AML lapses provide crucial lessons on internal controls

By Julie DiMauro, Compliance Complete

NEW YORK, Sept. 9 (Thomson Reuters Accelus) - Standard Chartered Bank’s $300 million penalty from the New York Department of Financial Services (NYDFS) for compliance failings last month highlights the importance of having effective transaction monitoring procedures to meet regulatory requirements, particularly those pertaining to high-risk clients. But what are these transaction monitoring requirements, and who is a high-risk client?

Under the terms of the order with NYDFS, London-based Standard Chartered has to suspend the processing of U.S.-dollar transactions for certain high-risk retail business clients in Hong Kong and the United Arab Emirates until its transaction monitoring program is enhanced. The settlement comes two years after the bank agreed to pay $667 million to a variety of U.S. regulators to resolve allegations of sanctions violations concerning transactions linked to Iran. (more…)

Bank of America’s mortgage-fraud deal yields quick impact; message may not be what enforcers wanted

By Stuart Gittleman, Compliance Complete

NEW YORK, Aug. 26, 2014 (Thomson Reuters Accelus) - It took just one day for U.S. Attorney General Eric Holder’s announcement Thursday that Bank of America would pay $16.65 billion over charges of fraudulent mortgage origination, securitization and servicing to have an impact.

But the impact was probably one of the last things Holder wanted to see as a result of the deal. (more…)

U.S. regulators ease credit risk rules on guarantees for banks using advanced approach

By Bora Yagiz, Compliance Complete

NEW YORK, Aug. 15, 2014 (Thomson Reuters Accelus) - Three major U.S. regulatory agencies have eased requirements under the advanced approach risk-based capital rules by removing a key requirement concerning guarantees provided by counterparties eligible for recognition as credit risk mitigants. The final rule , agreed by the Office of the Comptroller of the Currency, the Federal Reserve and the Federal Deposit Insurance Corporation, modified the definition of “eligible guarantee” for purposes of the advanced approach risk-based capital rules by removing the requirement that an eligible guarantee be provided by an “eligible guarantor” for all exposures other than securitization exposures. (more…)

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