New Joint Statement Outlines BSA Due Diligence Requirements for Politically Exposed Persons
September 1, 2020
FinCEN and prudential financial institution regulators (FRB, NCUA, FDIC, and OCC) issued a joint statement on Bank Secrecy Act due diligence requirements for customers who may be considered politically exposed persons (PEP).
The agencies do not interpret the term “politically exposed persons” to include U.S. public officials. BSA/AML regulations do not define PEPs, but the term 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. By virtue of this public position or relationship, these individuals may present a higher risk that their funds are proceeds of corruption or other illicit activity. The level of risk associated with PEPs, however, varies and not all PEPs are automatically higher risk.
Addressing the money laundering threat posed by public corruption of foreign officials continues to be a national security priority for the United States. In high-profile cases over the years, foreign individuals who may be considered PEPs have used banks as conduits for their illegal activities, including corruption, bribery, money laundering, and related crimes. Banks are reminded of their obligation to identify and report suspicious activity, including transactions that may involve the proceeds of corruption. The Agencies recognize that PEP relationships present varying levels of money laundering risk, and those risks depend on the presence or absence of numerous factors. Banks must adopt appropriate risk-based procedures for conducting CDD; however, under the CDD rule, there is no regulatory requirement or supervisory expectation for banks to have unique, additional due diligence steps for customers whom the banks consider to be PEPs.
Question of the Week
Q. If we refund money to cure a tolerance violation, must we also provide a corrected Closing Disclosure under the TILA/RESPA rule?
A. Yes. If you are curing a tolerance by providing a refund to the borrower, you must also deliver or place in the mail a corrected Closing Disclosure that reflects the refund no later than 60 days after consummation.
National Credit Union Administration
2020 Regulation Z Annual Threshold Adjustments
The NCUA released Regulatory Alert 20-RA-08 to inform credit unions of the annual Regulation Z threshold adjustments that the CFPB announced. The threshold adjustments cover credit card penalty fee safe harbors, HOEPA loan amounts, and Qualified Mortgage points and fees.
Consumer Financial Protection Bureau
CFPB RFI on Impact of CARD Act Regulations on Small Entities and the Consumer Credit Card Market
The CFPB issued a request for information (RFI) to examine the impact of the rules that implemented the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act Rules).
CFPB Guide For Intermediaries to Assist Non-Filers to Access the Economic Impact Payments
The CFPB released a guide to assist intermediaries in serving individuals to access the Economic Impact Payments and provide step-by-step instructions for frontline staff.
CFPB Issues Analysis of HMDA Data Points
The CFPB issued a new HMDA analysis of the 2019 HMDA data. The article presents findings based on the new and revised data points.
Federal Trade Commission
FTC Seeks Comment on Changes, Effectiveness of Five FCRA Rules
The FTC will be seeking comment in an Notice of Proposed Ruel Making on proposed changes to clarify five provisions of the Fair Credit Reporting Act that apply only to motor vehicle dealers. Credit unions often deal with motor vehicle dealers through indirect relationships.
Federal Reserve Board
Federal Open Market Committee Announces Approval of Updates to its Statement on Longer-Run Goals and Monetary Policy Strategy
The Federal Open Market Committee (FOMC) announced approval of updates to its Statement on Longer-Run Goals and Monetary Policy Strategy. The updates reflect changes in the economy over the past decade and how policymakers are taking these changes into account in conducting monetary policy.
Federal Housing Finance Agency
FHFA Extends Foreclosure and REO Eviction Moratoriums
The FHFA will extend the moratoriums on single-family foreclosures and real estate owned evictions until at least Dec. 31. The foreclosure moratorium applies to enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an enterprise through foreclosure of deed-in-lieu foreclosure transactions.
FHFA Further Extends Buying Loans in Forbearance & COVID-Related Loan Processing Flexibilities
The FHFA announced that Fannie Mae and Freddie Mac will extending buying qualified loans in forbearance and several loan origination flexibilities until Sept. 30.
Internal Revenue Service
Guidance to Implement Presidential Memorandum Deferring Certain Employee Social Security Tax Withholding
The IRS issued guidance on implementing the Presidential Memorandum which allows employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount (less than $4,000 in a bi-weekly pay period). Notice 2020-65 makes relief available for employers and generally applies to wages paid starting Sept. 1 through Dec. 31.
ACH Network FAQs
NACHA has updated its ACH Network Pandemic-Related FAQs to include information about recent IRS interest payments that are appearing in consumer accounts.
Office of Foreign Assets Control
OFAC has updated the SDN list as of Aug. 25. The last update prior to this was Aug. 20.