FINCEN ANNOUNCES PROPOSAL TO AMEND CURRENCY
TRANSACTION REPORTING EXEMPTION REGULATIONS
Source: FinCEN
The Financial Crimes Enforcement Network (FinCEN) is proposing to significantly simplify the current requirements for depository institutions to exempt their eligible customers from currency transaction reporting. FinCEN announced the proposal and request for comments in a Notice of Proposed Rulemaking (NPRM) submitted for publication in the Federal Register. FinCEN is seeking to amend the Bank Secrecy Act (BSA) regulation allowing depository institutions to exempt certain persons from the requirement to report transactions in currency in excess of $10,000, in accordance with the Government Accountability Office's (GAO's) recent recommendations and FinCEN's independent research on the underlying issues. As the GAO highlighted in its February report, Currency Transaction Reports (CTRs) provide unique and reliable information essential to supporting investigations and detecting criminal activity.
"FinCEN strongly supports the GAO's recommendations, and we are continuing to take a fresh look at existing BSA regulations," said FinCEN Director James H. Freis, Jr. "We welcome recommendations to streamline regulatory compliance while still providing needed information to law enforcement."
Under the current regulations, depository institutions may exempt from CTR reporting requirements: 1) large reportable transactions in currency made by other depository institutions, governmental departments or agencies, those acting with governmental authority, or public companies and their subsidiaries that are listed on one of three major exchanges referenced in FinCEN's regulations (commonly referred to as Phase I exemptions); and 2) reportable transactions in currency by eligible non-listed businesses or payroll customers (Phase II exemptions). FinCEN proposes removing three existing regulatory requirements. Under the NPRM, depository institutions would:
- No longer be requiredto file exemption forms for, or to annually review, customers that are depository institutions, government agencies, or entities acting with governmental authority;
- No longer be requiredto biennially renew a designation of exempt person filing for otherwise eligible Phase II customers; and
- No longer be required to wait 12 months before designating otherwise eligible Phase II customers for exemption.
More recent regulatory developments and rulemakings have benefited FinCEN's evaluation of CTR reporting and exposed areas where reasonable changes could be made to avoid potentially duplicative financial industry filing requirements. Modification of the CTR exemption process is part of FinCEN's continuing effort to increase the efficiency and effectiveness of BSA regulations, while maintaining the usefulness of BSA reports to law enforcement.
The proposed rules can be read at http://edocket.access.gpo.gov/2008/pdf/E8-8955.pdf. Written comments are welcome and must be received on or before June 23, 2008.
FACT ACT RISK-BASED PRICING NOTICES PROPOSED
Source: ABA Bank Compliance
On May 8, 2008, the Fed and the Federal Trade Commission released their long-awaited joint proposal on risk-based pricing notices. Comments on the proposal must be received on or before August 18, 2008.
Under the proposal, lenders would be required to inform consumers when they are being offered less-favorable terms based on poorer credit scores. Risk-based pricing refers to the practice of using a consumer's credit report, which reflects his or her risk of nonpayment, in setting or adjusting the price and other terms of credit offered or extended to a particular consumer. Many creditors offer more favorable terms to consumers with better credit histories.
The proposal-mandated by the 2003 Fair and Accurate Credit Transaction Act-would require a risk-based pricing notice to be provided to consumers when they receive more expensive credit terms than those offered to individuals with better credit histories. The notice generally would be provided after terms of the credit have been set, but before the consumer becomes contractually obligated on the credit transaction.
The proposal provides a number of different approaches that creditors may use to identify the consumers to whom they must provide risk-based pricing notices. In addition, the proposed rule includes certain exceptions to the notice requirement. The most significant of the exceptions permits creditors, in lieu of providing a risk-based pricing notice to those consumers who receive less favorable terms, to provide all of their consumers with their credit scores and explanatory information.
You can read the proposal at http://edocket.access.gpo.gov/2008/pdf/E8-10640.pdf .
BANK SECRECY ACT/ANTI-MONEY LAUNDERING NEWS
u Report on Residential Real Estate-Related Money Laundering
On May 1, 2008, the Financial Crimes Enforcement Network released a report on money laundering methods in the residential real estate industry. Similar to FinCEN's previous reports on Mortgage Loan Fraud and Money Laundering in the Commercial Real Estate Industry, this report-Suspected Money Laundering in the Residential Real Estate Industry: An Assessment Based upon Suspicious Activity Report Filing Analysis-also revealed an increase in the number of SARs indicating suspected money laundering in the real estate market. According to the report, those who launder money in residential real estate generally make timely payments and seek to make their transactions appear as unremarkable as possible in order to disguise the source of their funds. Money launderers were found to use many techniques such as structuring large transactions into smaller amounts in order to evade detection, using "straw buyers" to front for the true purchaser, and fraudulent documentation. Among the findings were:
1.The most commonly reported professions suspected of being involved in residential real estate-related structuring and/or laundering were builders, contractors and rehabbers.
2.The numbers of relevant SAR filings increased significantly in 2004-2005. The period 2005-2006 saw a pronounced flattening in the percentage increase in filings.
3. The pattern of increase generally follows that reported in FinCEN's commercial real estate and mortgage loan fraud SAR assessments. This suggests that the increase in these filings kept pace with the increase in mortgage loan activity brought on by an active national real estate market, which was, in turn, fueled in part by low mortgage interest rates.
You can read the report at:
http://cl.exct.net/?ju=fe3215797567007d7c1770&ls=fde715797162037a7c16727c&
m=ff041671776105&l=feba13787361007a&s=fe2813717d62027d721573&jb=ffcf14&t=.
u FinCEN Issues SAR Activity Review
FinCEN has launched Issue 13 of The SAR Activity Review Trends Tips & Issues.Section two of this issue highlights three recent FinCEN SAR analytical reports related to the insurance industry, mortgage loan fraud and residential real estate. "Overall, the quality of SAR reporting has been quite good, indicating that insurance companies are well positioned to report suspected illicit activities relating to money laundering" the report said. Section three provides examples of how BSA data played a role in healthcare fraud, tax evasion, and drug gang investigations. The recent issue can be found at
http://cl.exct.net/?ju=fe3115797567007d7c1771&ls=fde715797162037a7c16727c&
m=ff041671776105&l=feba13787361007a&s=fe2813717d62027d721573&jb=ffcf14&t=.
u FinCEN Launches New Website
FinCEN has launched its newly redesigned website which is intended to help financial institutions find useful information more easily through the website's categorized headings. Categorized headings appear at the top of the page and allow financial institutions to click on one place to view news, rules, guidance, and other regulatory information specific to each industry. Another new feature is "Quick Links," a navigation which appears on the right side of most pages to allow fast navigation to other useful information.
u Wolfsberg Group Updates FAQs on Politically Exposed Persons
The Wolfsberg Group has updated its 2003 Frequently Asked Questions on Politically Exposed Persons. The revised edition reinforces the position that only individuals holding senior, prominent or important positions with substantial authority over policy, operations or the use or allocation of government-owned resources can be PEPs (and that "Close Associates" and "Close Family" of PEPs should be included in the control framework for PEPs). The FAQs also include guidance on assessing:
· Whether an individual is a PEP;
· Managing PEP relationships other than in a private banking context;
· Dealing with PEP involvement in operating companies and state owned enterprises; and
· Managing individuals and related entities once the reason for their PEP designation is no longer applicable.
The updated FAQs can be found at:
http://cl.exct.net/?ju=fe3015797567007d7c1772&ls=fde715797162037a7c16727c&
m=ff041671776105&l=feba13787361007a&s=fe2813717d62027d721573&jb=ffcf14&t=.
u CTRC BSA E-Filing Requirements Specifications Error
On May 27, 2008, FinCEN issued a correction to an error that occurred in the instructions in the CTRC BSA E-Filing Requirements Specifications document that will be effective August 2008. This information can be found at http://www.fincen.gov/whatsnew/html/20080523.html.
HIGHLIGHTS OF PROPOSED AMENDMENTS TO RULES REGARDING CREDIT CARDS AND OVERDRAFT PROGRAMS
By: Bob Chunn, Esq., Watkins Ludlam Winter & Stennis, P.A.
The Federal Reserve has recently proposed amendments to provide additional protections to consumers regarding credit cards and overdraft protection programs. The following is a summary of the proposed amendments:
Regulation AA (Unfair Acts or Practices)
The proposal would amend Regulation AA to prohibit unfair or deceptive acts or practices by banks in connection with credit card accounts and overdraft services for deposit accounts.
Credit Cards
Time to Make Payments. Prohibits treating a payment as late unless the consumer has been provided a reasonable amount of time to make that payment. There would be a safe harbor for issuers that send periodic statements at least 21 days prior to the payment due date.
Allocation of Payments. When different APRs apply to different balances on a credit card account (i.e., purchases and cash advances), payments exceeding the minimum payment would have to be allocated using one of three designated methods or a method equally beneficial to consumers. The entire amount may not be allocated to the type balance with the lowest rate. A bank could, for example, split the amount equally between two balances. In addition, to enable consumers to receive the full benefit of discounted promotional rates (for example, on balance transfers), during the promotional period payments in excess of the minimum would have to be allocated first to balances on whichthe rate is not discounted.
Applying Rate Increases to Existing Balances. The proposal would prohibit increasing the interest rate on outstanding balances unless the increase is due to: (i) the operation of an index (in other words, the rate is a variable rate); (ii) the expiration or loss of a promotional rate (provided the rate is not increased to a penalty rate); or (iii) the minimum payment not being received within 30 days of the due date.
Two-Cycle Billing.The proposal would prohibit imposition of finance charges based on balances on days in billing cycles preceding the most recent billing cycle, a practice that is sometimes referred to as two-cycle billing.
Financing of Security Deposits and Fees. The proposal prohibits banks from financing security deposits and fees for credit availability (such as account-opening fees or membership fees) if charges assessed during the first twelve months would exceed 50 percent of the initial credit limit. The proposal would also require financed security deposits and fees exceeding 25 percent of the initial credit limit to be spread over the first year.
Credit Card HoldsThe proposal would prohibit imposition of a fee when the credit limit is exceeded solely because a hold was placed on available credit. This can occur where the final dollar amount of a transaction was not known in advance (for example, when a consumer checks into a hotel, a hold is placed for the expected cost of the stay).
Firm Offers of Credit.The proposal would require banks making firm offers of credit advertising multiple APRs or credit limits to disclose the factors that determine whether a consumer will qualify for the lowest APR and highest credit limit advertised (for example, the consumer's credit history, income, and debts). A safe harbor disclosure is provided.
Overdraft Services
Right to Opt Out.The proposal would prohibit banks from imposing a fee for paying an overdraft unless the bank has provided the consumer with an opportunity to opt out of the payment of overdrafts and the consumer has not done so. The opt-out right would apply to all transaction types. Banks also would be required to provide consumers a partial opt-out for overdrafts resulting from ATM and point-of-sale transactions.
Debit Holds. The proposal would prohibit banks from imposing a fee when the account is overdrawn solely because a hold was placed on funds in the consumer's deposit account. This can occur where the final dollar amount of the transaction was not known in advance (for example, when a consumer purchases fuel at the pump, a hold is placed for the estimated amount of fuel that will be purchased).
Regulation Z (Truth in Lending)
The proposal would also make complementary amendments to Regulation Z, including the following:
Due Dates for Mailed Payments. The proposal would provide that mailed credit card payments received by 5 p.m. on the due date, or if Sunday/holiday on the next business day, must be considered timely.
Regulation DD (Truth in Savings)
The proposal would also amend Regulation DD to complement the proposed amendments to Regulation AA, including the following:
Disclosure of Aggregate Overdraft Fees. The proposal would extend to all banks and savings associations the requirement to disclose on periodic statements the aggregate dollar amounts charged for overdraft fees and for returned item fees (for the month and the year-to-date), not only those that promote or advertise the payment of overdrafts as is currently the case.
Disclosure of Balance Information. The proposal would require institutions that provide account balance information through an automated system to disclose the amount of the consumer's funds available for immediate use or withdrawal, without including additional funds the institution may provide to cover overdrafts.
FLOOD INSURANCE: BUY NOW, SAVE LATER
Published by FEMA, June 5, 2008
Across south Mississippi, communities are beginning to adopt the new Digital Flood Insurance Rate Maps (DFIRM). As this process unfolds, federal and state officials encourage residents to examine their own status regarding flood insurance coverage.
Some communities, such as Gulfport and Pascagoula, have already adopted the new maps. Residents of those communities who had flood insurance policies in effect at the time their new maps were adopted may save hundreds of dollars in lower premiums because they were able to maintain their current flood zones.
Once communities adopt the new maps, flood zones in the coastal counties may change. Residents are advised not to wait until the last minute to act as, in most cases, there is a 30-day waiting period before a new flood insurance policy takes effect.
"If you take into account the 30-day waiting period and the fact that the new hurricane season has officially begun, the only logical conclusion is that now is the best time to purchase flood insurance," said Mike Womack, director for the Mississippi Emergency Management Agency.
Residents who wait to purchase their policy after the new flood maps are adopted may pay a much higher premium for their flood insurance because of the change in base flood elevations (BFE) of their property.
"Some residents may be waiting for the new maps to be approved before purchasing a flood insurance policy," said Sid Melton, director of Mississippi's Transitional Recovery Office. "But they need to understand that by waiting they could be costing themselves hundreds of dollars more down the road."
"Remember, those who have a flood insurance policy in effect at the time their community adopts the new map will be able to maintain their old flood zones," said Melton.
For questions concerning coverage, contact your local insurance agents or the NFIP Call Center in Biloxi, Miss. at 866-925-8789. To find out if your community participates in the NFIP, go to
http://cl.exct.net/?ju=fe2f15797567007d7c1773&
ls=fde715797162037a7c16727c&m=ff041671776105&l=feba13787361007a&
s=fe2813717d62027d721573&jb=ffcf14&t=.
FEMA coordinates the federal government's role in preparing for, preventing, mitigating the effects of, responding to, and recovering from all domestic disasters, whether natural or man-made, including acts of terror.
AGENCIES RELEASE LIST OF DISTRESSED OR UNDERSERVED NONMETROPOLITAN MIDDLE-INCOME GEOGRAPHIES
The federal bank and thrift regulatory agencies today announced the availability of the 2008 list of distressed or underserved nonmetropolitan middle-income geographies where bank revitalization or stabilization activities will receive Community Reinvestment Act (CRA) consideration as "community development."
As in past releases, the 2008 list will incorporate a one-year lag period for geographies that were designated as distressed or underserved in 2007, but were not designated as such in the 2008 release. Geographies subject to the one-year lag period are eligible to receive consideration for community development activities for the 12 months following publication of the 2008 list.
"Distressed nonmetropolitan middle-income geographies" and "underserved nonmetropolitan middle-income geographies" are designated by the agencies in accordance with their CRA regulations. The criteria used to designate these areas are available on the Federal Financial Institutions Examination Council (FFIEC) website ( ).
The 2008 list and lists from previous years can be found on the FFIEC website, along with data source information used to generate the list of distressed or underserved geographies for each year.
PREFERRED RISK FLOOD INSURANCE - A SMART BUY TODAY
Published by FEMA - June 4, 2008
Many Arkansas residents remain without flood insurance because their home or business has never been flooded. However, for those who live in a low- to moderate-risk area, signing up for an inexpensive Preferred Risk Policy under the National Flood Insurance Program (NFIP) makes sense. Flood damage is not covered under homeowner insurance policies, and there is no guarantee that federal assistance will be available when a flood occurs.
NFIP's Preferred Risk rates are quite a bargain, starting at $119 for buildings without basements. A home can be covered for up to $250,000 for the dwelling and $100,000 for contents. Replacement cost coverage is available for single-family, primary residences. Renters and business owners are also eligible for Preferred Risk Flood Insurance.
The Federal Emergency Management Agency (FEMA), which administers the Preferred Risk Policy under NFIP, reminds residents that flood insurance is important because floods can occur where they are least expected. Approximately 25 percent of all claims paid by the NFIP are for policies in low- or moderate-risk communities.
"Every year, flooding causes more than $2 billion of property damage in the United States," said Kathy Graf NFIP spokeswoman for FEMA in Arkansas. "Yet thousands who experienced flooding had no flood insurance because they thought they would never need it."
The special Preferred Risk Policy is available for buildings which house one to four families, and non-residential properties. Other insurance is offered at regular rates for buildings in higher risk areas and other types of properties. The Preferred Risk Policy will not be issued if a property owner has received:
- Two flood loss payments of more than $1,000 each;
- Three or more loss payments of any amount;
- Two federal disaster relief payments of more than $1,000 each;
- Three federal disaster relief payments of any amount; or
- One flood insurance claim payment and one disaster relief payment of more than $1,000 each including loans and grants.
Considering the substantial costs involved in repairing a home that suffers flood damage, and of replacing valuable and treasured items, the Preferred Risk Policy can be a wise purchase for property owners. For more information, call the National Flood Insurance Program at 1-800-427-4661 or visit the NFIP Internet site at
http://cl.exct.net/?ju=fe2f15797567007d7c1773&
ls=fde715797162037a7c16727c&m=ff041671776105&
l=feba13787361007a&s=fe2813717d62027d721573&jb=ffcf14&t=.
FEMA coordinates the Federal government's role in preparing for, preventing, mitigating the effects of, responding to, and recovering from all domestic disasters, whether natural or man-made, including acts of terrorism.
REGULATION CC - CHECK PROCESSING RESTRUCTURED
On July 19, 2008, the Federal Reserve Banks will transfer the check-processing operations of the Memphis branch office of the Federal Reserve Bank of St. Louis to the head office of the Federal Reserve Bank of Atlanta. To assist banks in identifying local and nonlocal checks and making funds availability decisions, the Board is amending the lists of routing symbols in appendix A associated with the Federal Reserve Banks of St. Louis and Atlanta to reflect the transfer of check-processing operations from the Memphis branch office to the Atlanta head office. To coincide with the effective date of the underlying check-processing changes, the amendments to appendix A are effective July 19, 2008. The Board if providing notice of the amendments at this time to give affected banks time to amend their availability schedules and related disclosures if necessary and provide their customers with notice of these changes.
For more information please visit
http://www.federalreserve.gov/newsevents/
press/bcreg/bcreg20080513a1.pdf.
UPCOMING EVENTS
Central MS BCTF Quarterly Meeting
Tuesday, July 15, 2008
10:00 a.m. - 1:00 p.m.
The Mississippi Bar Center
643 North State Street
Jackson, Mississippi
North MS BCTF Quarterly Meeting
Wednesday, July 16, 2008
1:00 p.m. - 4:00 p.m.
First Security Bank
295 Highway 6 West
Batesville, Mississippi
BCTF STEERING COMMITTEE
Jan Robinson, Cadence Bank, N.A., Chairman
Jim Thompson, Bank of Forest
Livvi Zeigler, Bank of Yazoo
Sandra Wilbourn, Hancock Bank
Kelly Menard, Citizen National Bank
Debbie Lockert, Planters Bank & Trust Co.
Barbara Redditt, First State Bank
