Financial Regulatory Forum

U.S. bank regulator promises better enforcement following scathing congressional report into HSBC AML failures

By Brett Wolf

WASHINGTON, July 18 (Thomson Reuters Accelus) - After widespread anti-money laundering (AML) failures at HSBC that continued for years due to lax regulatory oversight, a U.S. bank regulator has vowed to take a broader view of institutions’ compliance programs during examinations.

“The agency was much too slow in responding and addressing what are significant weaknesses or violations at this institution. Going forward, I would hope that we would be much more nimble and take into account the entire picture,” Thomas Curry, who took over as Comptroller of the Currency less than four months ago, said on Tuesday during a hearing by the Senate Permanent Subcommittee on Investigations. (more…)

Futures customer protections improved in U.S. and overseas after frauds

By Nick Paraskeva

NEW YORK, July 17 (Thomson Reuters Accelus) - The CFTC approved tough customer protection rules for futures firms’ days after the Peregrine default led to over $200 million in missing client funds. Losses arising from a fraud by the owner of the futures broker come soon after a $1.6 billion hole in client funds from the collapse of MF Global. The new rules require daily calculations of client money to be reported, and for senior management to certify cash movements.

The CFTC charged Peregrine Financial Group, and its owner Russell Wasendorf, Sr, of misappropriating customer funds. A recent audit of Peregrine by the National Futures Association (NFA), the self-regulator for independent futures firms, found the firm falsely represented it held $220 million customer funds at a bank account, which only had $5.1million. The firm filed for liquidation Friday, and its owner was arrested. (more…)

Learn the compliance lessons from an epic fail in correspondent banking and trade finance

By Kim R. Manchester, Thomson Reuters Accelus contributing author

NEW YORK, July 16 (Thomson Reuters Accelus) - A Settlement Agreement was released in June 2012 by the United States Department of the Treasury regarding the voluntary self-disclosure to the Office of Foreign Assets Control (OFAC) by ING Bank, N.V. (ING Bank), a financial institution registered and organized in the Netherlands. The violations of numerous sanctions programs imposed by the United States against Cuba, Burma, the Sudan, Libya and Iran were determined by the Americans as “egregious.” (more…)

U.S. bank regulators warn on due diligence in using cloud computing services

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 13 (Thomson Reuters Accelus) – Bank regulators this week raised their warnings to financial institutions on the dangers of using vendors that provide so-called “cloud computing” services.

Cloud computing lets businesses outsource data storage and transactions to vendors that host remote datacenters that can only be accessed over the internet. The model allows the companies to change their information technology without buying and setting up new systems. (more…)

U.S. brokerage regulator warns of ‘unpleasant surprises’ on ETNs

By Stuart Gittleman

NEW YORK, July 11 (Thomson Reuters Accelus) – The Financial Industry Regulatory Authority, the U.S. brokerage regulator, warned investors Tuesday in an alert of the features and risks of exchange-traded notes.

The alert, Exchange-traded notes: avoid unpleasant surprises, listed the risks of certain ETNs and urged investors to carefully investigate before investing in them.  (more…)

Barclays scandal highlights value of monitoring and testing – governance experts

By Emmanuel Olaoye

WASHINGTON/NEW YORK, July 10 (Thomson Reuters Accelus) - A major theme in the Barclays scandal over rate-rigging is the firm’s failure to conduct adequate monitoring and testing of its compliance program, governance experts have told Thomson Reuters Accelus.

Barclays has agreed to pay $453 million to settle charges by U.S. and UK authorities that its employees manipulated the London Interbank Offered Rate, or LIBOR, a key benchmark for global financial transactions, including payments on mortgages, credit cards and other financial contracts.  (more…)

First wave of U.S. living wills has limitations, but offers useful start

By Bora Yagiz

NEW YORK, July 9 (Thomson Reuters Accelus) - The “living will” resolution plans submitted to U.S. regulators by nine big banks last week suffer from a number of limitations, including narrow scenarios of financial distress and an assumption that regulators will be coordinated in their approach. But there will be plenty of opportunity to perfect the blueprints.

Five major U.S. banking organizations and four foreign-based bank holding companies with $250 billion or more in total nonbank assets submitted on July 2 their resolution plans, or “living wills,” to the Federal Reserve Board and Federal Deposit Insurance Corporation (FDIC) as required by section 165(d) of the Dodd-Frank Act (DFA). This constituted the first of the three waves of submissions of a staggered schedule arranged according to the banks’ sizes and due to be completed by end-2013. These plans to complement the recovery plans that are designed to maintain firms under extreme stress as going concerns, will serve as the official point of entry for bankruptcy. (more…)

Exclusive jurisdiction clauses fall in the face of FINRA proceedings

By Christopher Elias (UK)

LONDON, July 5 (Business Law Currents) – The English courts recently decided that an exclusive jurisdiction clause between Citigroup’s English subsidiary and two corporate vehicles of family trusts belonging to a Saudi Arabian family did not prohibit the Saudi investors from bringing FINRA arbitration proceedings against Citigroup’s U.S. arm.

In Citigroup Global Markets Ltd v Amatra Leveraged Feeder Holdings Ltd, the court was tasked with deciding whether FINRA’s regulatory regime or an English exclusive jurisdiction clause should prevail. The court concluded that Citigroup’s U.S. subsidiary should not be prevented from facing proceedings in the U.S. as the benefit of the exclusive jurisdiction clause applied solely to Citigroup’s English subsidiary. (more…)

U.S. securities regulators focus rulemaking, exams on retirement products

By Stuart Gittleman

NEW YORK, July 5 (Thomson Reuters Accelus) – The U.S. Securities and Exchange Commission will return its rulemaking and examination focus to retail sales of retirement products, a Division of Investment Management official told the Insured Retirement Institute, an industry group.

“[T]o better understand the impact of our regulations on market participants, we are working to staff a new examination function within the division, as required by the Dodd-Frank Act,” associate division director Susan Nash said at the IRI government, legal and regulatory conference last week. (more…)

Barclays case gives U.S. futures regulator more clout on overseas derivatives, funding

By Nick Paraskeva

NEW YORK, July 5 (Thomson Reuters Accelus) - The U.S. Commodity Futures Trading Commission’s $200 million settlement with Barclays for manipulation and false reporting of benchmark interest rates not only helped fuel a firestorm that consumed the bank’s top management. It also gives the futures regulator more clout to apply new Dodd-Frank swaps rules to activities abroad despite industry and political opposition, and to make a case against congressional Republicans for a strong enforcement budget.

The CFTC joined the U.S. Justice Department and Britain’s Financial Services Authority (FSA) in settling allegations that Barclays had manipulated Libor interbank rates in London that affect U.S. consumers and markets. The fine paid to the CFTC was the largest monetary penalty in the case, and the enforcement came hard on the heels of the revelation by JPMorgan Chase that it had discovered losses on its UK derivatives transactions that may grow to as much as $9 billion. (more…)

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