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FinCEN Proposes Broad AML Obligations for Investment Advisers

As part of its continuing but slow expansion of the types of financial institutions that are subject to anti-money laundering (AML) obligations under the Bank Secrecy Act and USA PATRIOT Act, FinCEN proposed on August 25, 2015, to require certain investment advisers to establish and maintain AML programs and file suspicious activity reports (the Proposed Rules).  The Proposed Rules go further than FinCEN’s 2002 and 2003 proposals for investment advisors, which generally were limited to proposing AML program requirements only, without additional suspicious activity reporting and certain other record keeping requirements.

In explaining its rationale for the Proposed Rules, FinCEN acknowledges that advisers work with financial institutions that are already subject to BSA requirements, such as when executing trades through broker-dealers to purchase or sell client securities, or when directing custodial banks to transfer assets.  FinCEN notes, however, that these institutions may not have sufficient information to assess suspicious activity or money laundering, and that investment advisers therefore have an important role to play in safeguarding the financial system from terrorist activities and financial crime.

General Scope and Examination Authority

Under the Proposed Rules, covered investment advisers would include any persons who are registered or required to be registered with the SEC under section 203 of the Investment Advisers Act.  This would include both primary advisers and subadvisers.  However, because advisers with less than $100 million in regulatory assets under management are generally prohibited from registering with the SEC, those advisers would not be subject to the Proposed Rules.

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Bank Regulators take Aim at Payday Lenders and AML Control

In two recent posts on BryanCavePayments.com, Bryan Cave attorneys have addressed new developments related to the CFPB’s efforts to regulate payday lenders through their banking relationships as well as statements from New York’s top banking regulators suggesting that bank executives should be held personally liable for anti-money laundering violations.

On April 1st (but unfortunately not part of any April Fools joke), John Reveal published a post on the CFPB’s efforts against payday lenders.

In May 2014, the Department of Justice (DOJ) and the FDIC were criticized by the U.S. House of Representatives’ Committee on Oversight and Government Reform in May 2014 Report for using the DOJ’s “Operation Choke Point” to force banks out of providing services to payday lenders and other “lawful and legitimate merchants”. The Committee’s report noted, among other things, that the DOJ was inappropriately demanding, without legal authority, that “bankers act as the moral arbiters and policemen of the commercial world”.

Now the CFPB has announced that it is considering rules that would end “payday debt traps”.  At least the CFPB is following standard regulatory processes in doing so rather than trying to regulate payday lenders by punishing their bankers.  The CFPB’s announcement, published March 26, 2015 (available here), outlines its proposals in preparation for convening a Small Business Review Panel to gather feedback from small lenders, which the CFPB refers to as “the next step in the rulemaking process”.

The CFPB’s proposal considers payday loans, deposit advance products, vehicle title loans, and certain other loans, and includes separate proposals for loans with maturities of 45 days or less, and for longer-term loans.  Broadly speaking, the CFPB is considering two different approaches – prevention and protection – that lenders could choose from.

You can read the rest of John’s post here.

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Bryan Cave Hosts ACAMS Atlanta Chapter Event on Digital Currencies

Bryan Cave is hosting the CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, April 25 2013, from 2:00pm to 4:00pm. The event’s presentation is “Digital Currencies, Third Party Payment Processing, Oh My!” featuring Anthony Gallippi, co-founder and CEO of BitPay.

All AML/CTF professionals in the region are welcome to attend.

June 7, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

Bitcoin and other digital currencies are gaining traction in the marketplace against traditional fiat and specie currencies.  Current economic conditions have led many average citizens to exploring potential ways to secure earnings from government devaluation.  Criminals continue exploring ways to launder proceeds while reducing risk of detection.  And businesses cry out for less expensive means of receiving payments which are less susceptible to fraud.  Learn the facts about the history, growth and benefits of bitcoin.  Explore potential risks involved in accepting and using bitcoin and/or in providing financial services to those that do.  Learn too about bitcoin payment processing pioneer BitPay, its take on the future of digital currencies and payment processing, and FinCEN’s recent Guidance on Virtual Currencies and Regulatory Responsibilities.

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Illinois Orders Six Unlicensed Money Transmitters to Cease & Desist

The Illinois Department of Financial & Professional Regulation recently released five cease and desist orders from January 2013 against six entities charging each with unlicensed activities under the state’s Transmitters of Money Act. These six entities offer a variety of services in Illinois, including domestic and international money transfer, bill payment services and prepaid cards.

One of these companies, Square, Inc. is described in its order as providing “mobile card reading devices for the express purpose of transmitting money,” providing iPhone and Android apps to Illinois consumers “for the express purpose of transmitting money” through those devices and selling and issuing “digital gift cards to Illinois consumers for the express purpose of purchasing items from designated vendors on Square’s Website.”

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FDIC Issues Another Consent Order on Third-Party Payment Processor Issues

The FDIC recently released a consent order with Meridian Bank (Paoli, Penn.) which dealt largely with the bank’s oversight and management of its electronic payment program and third-party payment processors (TPPPs), as well as BSA/AML issues. Although this order is tailored by the FDIC to address specific issues found at the bank and focuses on merchant transaction processing, a review of the requirements outlined in the order may be useful for banks and other financial services companies that deal with third-party providers or high-risk customers.

The order includes a lengthy and detailed list of the steps the bank must take regarding its oversight and management of third parties involved in the bank’s electronic payments program, including the following:

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FinCEN/FDIC Assess $15 Million Civil Money Penalties against Bank for BSA/AML Violations

Hot on the heels of FinCEN’s advisory on risks associated with third-party payment processors (see Government Update, issue 18), FinCEN and the FDIC assessed concurrent $15 million civil money penalties against First Bank of Delaware for violations of BSA/AML laws and regulations. Among other things, FinCEN and the FDIC found that the bank “failed to adequately oversee third-party payment processor relationships and related products and services commensurate with associated risks.”

The bank also settled related civil claims with the DOJ, which alleged it “established direct relationships with several fraudulent merchants and third-party payment processors working in cahoots with a large number of additional fraudulent merchants.” On behalf of those entities, the DOJ alleged, the bank originated hundreds of thousands of debit transactions against consumers’ bank accounts, many of which originated via remotely created checks (RCCs). The DOJ also alleged that the bank was aware of “significant red flags warning the bank that the debit transactions were tainted by fraud.” The DOJ’s $15 million penalty is concurrent with those of FinCEN and the FDIC. The bank also is required to maintain an account with $500,000 to pay consumer claims arising from its alleged conduct. 

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Bryan Cave Hosts ACAMS Atlanta Chapter Event on BSA/AML Look Backs

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, June 7, 2012, from 2:00pm to 4:00pm, with registration starting at 1:30pm. The event’s presentation is “Look Backs: The Good, The Bad and The Ugly” featuring Craig Stone and Donna DeMartino with Alvarez & Marsal.

All AML/CTF professionals in the region are welcome to attend.

June 7, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

The overall presentation will focus on several key factors associated with a BSA/AML look back relative to various activities that are required to take place especially when the financial institution has not foreseen the risks associated with payment processors; for example: unauthorized returns, high number of charge backs and customer complaints, higher rates of remote check capture, ACH debits as unauthorized and/or due to insufficient funds.

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Bryan Cave Hosts ACAMS Atlanta Chapter Event on BSA/AML Software Testing

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, March 15, 2012, from 2:00pm to 4:00pm. The event’s presentation is “Best Practices for BSA/AML Software Testing,” featuring Allan Cuttle, Director of Risk Management for ICS Risk Advisors.

All AML/CTF professionals in the region are welcome to attend.

March 15, 2012
2:00 PM – 4:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Parking is available at 14th Street and West Peachtree St.
$4 cash and cards accepted

Free for Chapter Members; $20 for Non-Chapter Members

RSVP Here

This event will include tips on pre and post software implementation issues, pitfalls, best practices, regulatory environment and expectations, along with testimonials on the value of this process to effective risk management.

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What Bank Directors Need to Know About Bank Secrecy Act Compliance

Ten years ago, Bank Secrecy Act (BSA)/anti-money laundering (AML) compliance was one of the biggest areas of concern for banks and their regulators.  Following September 11 and the heightened regulatory focus on BSA matters, most banks found it necessary to expend significant resources to enhance or even rebuild their BSA/AML programs.

In the past few years, bank regulators have had to focus on other matters, including residential and commercial loan concentrations, adequate capitalization, and even bank failures.  Banks also wisely have focused on these matters during these difficult economic times.

It is important, however, that these other matters do not push BSA/AML compliance aside.  This article summarizes some of the top BSA-related issues that the Board of Directors of every bank should keep in mind.

Best Practices for the Board

It is easy in difficult financial times for the Board and management to push aside compliance matters, including BSA/AML compliance.  Compliance matters can seem less important when one is worried about the bank’s very survival.

Nevertheless, compliance continues to be important.  It is critical that the Board stay informed, devote adequate resources to compliance, and set the proper tone for compliance within the organization.

The following are four best practices for Boards of Directors.

1.     Require Periodic and Thorough BSA Reports

One of the most important things for the Board to understand about the BSA and AML requirements is that the Board is expected to stay abreast of the institution’s progress and what is working and not working.  That means that the Board needs to receive at least annual BSA/AML training, and also needs to receive regular reports on BSA/AML compliance matters from its BSA officer, including on suspicious activity report (SAR) filings and trends.

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Bryan Cave Hosts ACAMS Atlanta Chapter Prepaid Access Event

Bryan Cave is hosting the quarterly CPE and general membership meeting for the Atlanta Chapter of the Association of Certified Anti-Money Laundering Specialists on Thursday, November 3, 2011, from 10:00am to 12:00pm.  We are also very pleased to announce that our own Judie Rinearson will be the guest speaker.

All AML/CTF professionals in the region are welcome to attend.

November 3, 2011
10:00 AM – 12:00 PM

Fourteenth Floor
1201 W. Peachtree Street, NW
Atlanta, GA 30309

Free for Chapter Members; $5 for Non-Chapter Members

RSVP Here

Judith Rinearson leads the payments practice team for Bryan Cave LLP, where she is a partner in the firm’s New York City office. She also is chair of the Network Branded Prepaid Card Association’s Government Relations Working Group, the association’s representative to FinCEN’s Bank Secrecy Act Advisory Group and a Paybefore contributing editor.

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