The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has finalized its long-awaited beneficial ownership rule, which it proposed in 2014. The regulation does two things. First, it extends Customer Due Diligence (CDD) requirements under Bank Secrecy Act (BSA) rules to the natural persons behind a legal entity. Second, the regulation adds a fifth pillar to the traditional “four pillars” of an effective anti-money laundering (AML) program by requiring covered financial institutions to establish risk-based procedures for conducting ongoing customer due diligence. As of May 11, 2018, entities subject to BSA will be required to identify and verify the identity of beneficial owners of legal entity customers at the time the customer opens a new account, subject to certain exclusions and exemptions, as well as develop risk profiles and conduct ongoing monitoring of customers.
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FFIEC Releases Guidance on Risk Management for Mobile Financial Services
The Federal Financial Institutions Examination Council (FFIEC) has issued new guidance to its examiners regarding mobile financial services (MFS), which includes mobile banking and mobile payments. The guidance also provides valuable insight for industry participants in the MFS space as to regulators’ expectations and tips for mitigating applicable risks.
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CFPB Releases Arbitration Proposal
Today, the Consumer Financial Protection Bureau (the “CFPB”) released much-anticipated proposed rules for mandatory arbitration clauses, which the CFPB colloquially refers to as “contract gotchas.” The proposed rules follow on the heels of the CFPB’s March 2015 Arbitration Report, which the CFPB concluded demonstrates that mandatory arbitration clauses are detrimental to consumers. As expected, the proposed rules evidence the CFPB’s concerns around mandatory arbitration clauses.
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CFPB to Issue Proposal in July Amending Rules on TILA-RESPA Integrated Disclosures
Real estate lenders and agents struggling with the new TILA-RESPA Integrated Disclosure rules will have the opportunity to suggest improvements to the rules this summer. On April 28, Consumer Financial Protection Bureau (CFPB) Director Richard Cordray sent a letter to eight financial industry trade groups stating that the agency intends to propose new amendments in late July 2016 to the rules synthesizing mortgage lending disclosures under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). Issued pursuant to the Dodd-Frank Act, the rules are known as the TILA-RESPA Integrated Disclosures (TRID) rule, also referred to by the CFPB as the Know Before You Owe rules.
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Michigan Supreme Court Holds Full Credit Bid Does Not Impact Lenders’ Right to Recover From Third Parties
In an important ruling for mortgage lenders and servicers, the Michigan Supreme Court clarified in Bank of America v First American Title Ins Co, Docket No. 149599 (2016) the impact of a full credit bid—when a lender bids the full amount of the outstanding debt at a foreclosure sale—on a lender’s ability to bring claims against a third party following foreclosure. In doing so, the Supreme Court expressly overruled a previous holding by the Court of Appeals in New Freedom Mtg Corp v Globe Mtg Corp, 281 Mich App 63; 761 NW2d 832 (2008).
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In Wake of “Panama Papers” Disclosures, FinCEN Moves to Finalize Anti-Money-Laundering Rules Affecting Shell Companies
The U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) has stated that it is taking the last steps in the process to finalize its long-awaited beneficial ownership rule, which it proposed in 2014. If finalized as proposed, the rule would, for the first time, extend Customer Due Diligence (“CDD”) requirements under Bank Secrecy Act (“BSA”) rules to the natural persons behind a legal entity. FinCEN has indicated that the rule will now go to the White House’s Office of Management and Budget (“OMB”) for review, a process that generally can take up to 90 days, before a final rule can be issued. FinCEN did not confirm any concrete time frame for this process.
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Federal Regulators Release BSA/AML Guidance for Prepaid Products
Federal regulators published guidance Monday regarding the application of customer identification program (CIP) requirements to holders of prepaid cards and other types of prepaid access. Although the guidance is meant to clarify longstanding CIP rules—issued in 2003 to implement USA PATRIOT Act amendments to the Bank Secrecy Act (BSA)—the guidance has the effect of setting new standards for banks that issue prepaid access. This includes prepaid cards that third-party program managers sell and distribute, as well as cards that are used to provide employee wages, healthcare, and government benefits.
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Watch for Litigation Concerning Website Accessibility to the Disabled to Rise
As has been reported in the news recently, there is increasing litigation asserting that the websites of some commercial enterprises, including financial institutions, are not accessible to consumers with disabilities. The Americans with Disabilities Act was adopted before widespread adoption of the internet, but the Department of Justice and many courts have taken the position that the ADA’s prohibition of discrimination against anyone on the basis of disability in the use of “accommodations of any place of public accommodation” applies to websites as well as physical establishments.
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