By: Steve Shepherd, CRCM,

On May 6, 2020 the CFPB (Consumer Financial Protection Bureau) issued a compliance aid with respect to compliance with Regulation B ECOA’s notice of action taken rules and the SBA’s (Small Business Administration) Paycheck Protection Program.
 
The new compliance aid comes in the form of three questions and answers from the CFPB regarding a completed application and the financial institution’s responsibilities for applications taken under the SBA’s Paycheck Protection Program.
 
A few of the interesting areas to note are that 1) an institution does not have a completed application sufficient to issue an action taken until it has been issued a loan number by the SBA and 2) if the institution refuses to grant credit prior to receiving an SBA loan number, the financial institution has made a credit decision and a notice of action taken would be required.
 
For additional information regarding the Regulation B ECOA requirements and the Paycheck Protection Program please see the compliance aid and additional guidance the CFPB has provided located at:
 
https://files.consumerfinance.gov/f/documents/cfpb_ecoa-regulation-b_faqs-covid-19.pdf
​

By James Moore, CRCM

The CFPB (Consumer Financial Protection Bureau) has recently issued an interpretive rule under Regulation Z for TRID and Right of Rescission waiting period requirements.  Under the TRID Rule, creditors generally must deliver or place in the mail the Loan Estimate to consumers no later than seven business days before consummation and consumers must receive the Closing Disclosure no later than three business days before consummation. The Regulation Z Rescission Rules also provide consumers with at least three business days from consummation to rescind certain credit obligations secured by the consumer’s principal dwelling, and creditors are required to provide consumers with a disclosure informing them of this rescission right. Under the TRID Rule and the  Regulation Z Rescission Rules, however, after receiving the required disclosure(s), a consumer may modify or waive these waiting periods if the consumer determines that he or she needs credit extended to meet a bona fide personal financial emergency.  

Under the interpretive rule, the CFPB has determined that the COVID-19 pandemic could be considered a bona fide personal financial emergency for affected consumers.  This is not a change in the regulation but clarification that COVID-19 may be a reason to waive timing requirements if a personal financial emergency has occurred such as job loss or quarantine.  The rules still require for the waiting periods to be modified or waived, the creditor must have a dated written statement by the consumer that: (1) describes the emergency, (2) specifically modifies or waives the waiting period, and (3) bears the signature of all consumers who are primarily liable on the legal obligation (for the TRID Rule) or who are entitled to rescind (for the Regulation Z Rescission Rules). 

In addition, the CFPB recognized that the pandemic may also create valid changed circumstances in some instances that would permit a creditor to provide revised disclosures to consumers to reset tolerances for closing costs.  Financial institutions should use caution and document why the pandemic caused the changed circumstance and deliver revised disclosures within three business days of learning of the changed circumstance in accordance with established TRID requirements.
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The CFPB’s interpretive rule can be found here:
https://files.consumerfinance.gov/f/documents/cfpb_tila-respa-integrated-disclosure_rescission-pandemic-interpretive-rule.pdf

By: Matthew Waters

As a result of the Federal Reserve Board reducing reserve requirements for transaction accounts to zero percent, the Board noted “the retention of a regulatory distinction in Regulation D between reservable “transaction accounts” and non-reservable “savings deposits” is no longer necessary.”  As a result, the Federal Reserve Board has announced an interim final rule effective on April 24, 2020 that removed Regulation D transaction limitations (six per month) from savings deposits.  The interim final rule allows, in part, financial institutions to suspend excessive activity monitoring and customer notification procedures for savings and money market accounts. 
 
Under the interim final rule, the term “savings deposit” means a deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account (MMDA), that otherwise meets the requirements in this section and from which, under the terms of the deposit contract or by practice of the depository institution, the depositor may be permitted or authorized to make transfers and withdrawals to another account (including a transaction account) of the depositor at the same institution or to a third party, regardless of the number of such transfers and withdrawals or the manner in which such transfers and withdrawals are made.
 
In addition to the interim final rule, the Federal Reserve Board has issued technical guidance on the changes made by updating its document titled ““Savings Deposits Frequently Asked Questions”.  Financial institutions should review the interim final rule and updated “Savings Deposits Frequently Asked Questions” supplement, along with its deposit account agreements and Truth in Savings disclosures for savings and money market products to determine any changes to policy and procedures as well as to determine if any action should be taken to notify customers of any possible changes that will take place as a result of the interim final rule.
 
It should also be noted this is an interim final rule with a comment period open until June 29, 2020; therefore, we expect more clarification on a few items not specifically delineated in the “Savings Deposits Frequently Asked Questions” supplement.  We will monitor for additional developments in this area and issue an updated article, as necessary. 
 
To access the Federal Reserve Board’s article, use the following link:
https://www.federalreserve.gov/newsevents/pressreleases/bcreg20200424a.htm

To access the “Savings Deposits Frequently Asked Questions” supplement, use the following link:
https://www.federalreserve.gov/supervisionreg/savings-deposits-frequently-asked-questions.htm  

 By: Steve Shepherd, CRCM

On April 16, 2020 the Consumer Financial Protection Bureau (CFPB) published a final rule which amended reporting thresholds under Regulation C, Home Mortgage Disclosure Act (HMDA).  These reporting thresholds, in part, determine the lending volumes of covered loans (i.e. loans that would be reportable under transactional requirements) to determine which financial institutions are required to collect and report HMDA data.  As a result, this change may result in additional financial institutions being exempt from HMDA data collection and reporting requirements for 2020 and moving forward. 
 
Specifically, the final rule adjusts Regulation C’s coverage thresholds for closed-end mortgage loans and open-end lines of credit.  Effective July 1, 2020, the final rule permanently raises the closed-end coverage threshold from 25 to 100 covered closed-end mortgage loans in each of the two preceding calendar years.  The final rule also adjusts the rules so that institutions have the option to report closed-end data collected in 2020 if they: (1) meet the definition of financial institution as of January 1, 2020 but are newly excluded on July 1, 2020 by the increase in the closed-end threshold, and (2) report closed-end data for the full calendar year.  The final rule also sets the permanent open-end threshold at 200 open-end lines of credit effective January 1, 2022, upon expiration of the temporary threshold of 500 open-end lines of credit.
 
What does this mean for financial institutions currently collecting information for HMDA reporting in 2020?  Essentially this means if the financial institution did not originate 100 or more covered closed-end mortgage loans in 2018 and 2019, beginning July 1, 2020 it would no longer be required to collect information and it would not be required to report closed-end mortgage applications on the 2020 HMDA LAR.  However, at its option the institution could continue to collect and report information for 2020 if it does so for the entire calendar year but will be bound to the new thresholds for reporting going forward.  Until 2022, a financial institution would continue to not report covered open-end lines of credit so long as it did not originate 500 or more covered open-end loans in each of the prior two years.  Going forward, if an institution does not exceed the closed-end mortgage and open-end lines of credit thresholds in the previous two years, it would not be subject to HMDA reporting for that year.
 
A financial institution should perform an analysis to determine if it remains a HMDA covered institution for 2020 considering these changes. Financial institutions currently subject to 2020 reporting who will be newly exempt as of July 1, 2020 should consider whether or not it would be best to continue to collect and report information for 2020 or to cease collection and reporting and update its policies and procedures accordingly. 

The CFPB provided several documents to help financial institutions with HMDA coverage questions.  See the links below for additional information.  

• Unofficial, informal redline to reflect changes to Regulation C
• Executive Summary
• HMDA Rule Key Dates Timeline 2020-2022
• HMDA institutional coverage chart, effective July 1, 2020 through December 31, 2021
• HMDA institutional coverage chart, effective January 1, 2022
• HMDA transactional coverage chart, effective July 1, 2020 through December 31, 2021
• HMDA transactional coverage chart, effective January 1, 2022

By: Jeremy Clifton, CRCM, CAMS

On April 13, 2020 FinCEN and the US Department of Treasury issued additional guidance to clarify beneficial ownership expectations for financial institutions obtaining new customers via Payroll Protection Program (PPP) loan originations.  The guidance is provided through a document titled Paycheck Protection Program Frequently Asked Questions (FAQs).  FinCEN has stated it will update this document with any additional BSA-related FAQs involving PPP loans as the need may arise in the future. 

The FAQs restate the previous guidance issued on existing customers and provide new guidance on beneficial ownership standards for financial institutions originating PPP loans for new customers.

Specifically per the FAQs: “For new customers, the lender’s collection of the following information from all natural persons with a 20% or greater ownership stake in the applicant business will be deemed to satisfy applicable BSA requirements and FinCEN regulations governing the collection of beneficial ownership information: owner name, title, ownership %, TIN, address, and date of birth. If any ownership interest of 20% or greater in the applicant business belongs to a business or other legal entity, lenders will need to collect appropriate beneficial ownership information for that entity.”

It should be noted the current SBA sample PPP borrower application requires institutions to obtain certain information from all natural persons with a 20% or greater ownership stake in the applicant business and contains fields for the above mentioned information (owner name, title, ownership %, TIN, address); however, it does not contain a field for date of birth. Institutions will be required to implement this “amended” beneficial ownership process at a 20% ownership stake to satisfy standard beneficial ownership requirements for PPP loans originated for new customers.  Moreover, procedures should also ensure the financial institution obtains the covered owner’s date of birth through the information gathering process to ensure future compliance. 
 
View the full FAQ document which addresses beneficial ownership rules for originating PPP loans for new and existing customers at the following link:
​
https://www.fincen.gov/sites/default/files/2020-04/Paycheck_Protection_Program_FAQs.pdf
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By: Nash Cullens

On April 3, 2020 FinCEN released guidance to help relieve the pressure of Bank Secrecy Act (BSA) guidelines for financial institutions due to the COVID-19 virus pandemic.  As communicated in current and previous guidance, compliance with BSA remains crucial, and  FinCEN expects financial institutions to continue following a risk-based approach to diligently adhere to their BSA obligations to detect and report potential money laundering and related crimes, including terrorism finance.  FinCEN has also indicated financial institutions should be on special alert for particular types of fraud that commonly arise following natural disasters or national emergencies, such as imposter scams, investment scams, product scams, COVID-19-related insider trading,  benefits fraud, charities fraud, and cyber-related fraud.

Due to the increasing spread of the COVID-19 virus and the affect it has on financial institutions, FinCEN has relaxed deadlines for BSA reporting requirements.  While they did not set what temporary deadlines would be, they stated that reasonable delays in reporting would be understandable.  In addition, FinCEN suspended the implementation of CTR ruling FIN-2020-R001 (“the 2020 Ruling”) for reporting transactions on sole proprietorships and entities doing business under an alternate name until further notice.

FinCEN also released guidance for completing beneficial ownership requirements for Payroll Protection Program (PPP) loans.  For all PPP loans originated for new customers, the financial institution should complete beneficial ownership procedures according to its policy and regulatory guidance.  However, the guidance provides an exception when originating a PPP loan for an existing customer. FinCEN does not require the financial institution to reverify or recertify the beneficial ownership form when a PPP loan is originated for an existing customer. Furthermore, if the financial institution has not yet collected beneficial ownership information on existing customers, it does not need to collect and verify beneficial ownership information for those customers applying for a PPP loan, unless otherwise indicated by the lender’s risk-based approach to BSA compliance.  Specifically, FinCEN stated that although financial institutions are not specifically required to recertify beneficial ownership for existing customers they should adhere to their risk-based procedures for recertifying beneficial ownership forms.  Therefore, financial institutions should consider the risk level of each existing customer requesting to originate a PPP loan and make a risk-based decision to determine if beneficial ownership should be reverified such as for high risk customers or instances where the financial institution has knowledge of facts that would reasonably call into question the reliability of such information.  Institutions should consider amending their BSA policy to document the PPP exception as it relates to beneficial ownership on existing customers to ensure that this exclusion would not be in contravention to the current board approved BSA policy.

The previous paragraph refers only to new and existing customer requests to originate PPP loans.  All other account types being opened should be opened in accordance with the financial institution’s policy and existing regulatory guidance.  FinCEN stated that this guidance does not supersede previous rulings but is in addition to previous guidance.  Further, the PPP guidance does not change the requirement for the institution to implement its CIP on any new customer.

Existing guidance provides in general, covered financial institutions must identify and verify the identity of the beneficial owner(s) of legal entity customers at the time each new account is opened.  However, if the individual identified as the beneficial owner is an existing customer of the financial institution and is subject to the financial institution’s CIP, a financial institution may rely on information in its possession to fulfill the identification and verification requirements, provided the existing information is up-to-date, accurate, and the legal entity customer’s representative certifies or confirms (verbally or in writing) the accuracy of the pre-existing CIP information. The covered financial institution’s records of beneficial ownership for the new account could cross-reference the relevant CIP records and the verification of information would not need to be repeated.  However, record retention procedures should ensure the beneficial ownership identifying information is maintained for five years after the new account is closed and the relied upon description of any document relied on, description of any non-documentary methods and the results of any measures undertaken, and of the resolution of each substantive discrepancy is retained for five years after the certification of the accuracy of the preexisting CIP information is made. 

It should also be noted that existing guidance from FinCEN ruling FIN-2018-R004 provides exceptions, in part, to the requirement to identify and verify the identity of the beneficial owner(s) when a legal entity customer opens a new account as a result of a renewal, modification, or extension of a loan, commercial line of credit, or credit card (e.g., setting a later payoff date) that does not require underwriting review and approval.  This exception only applies to the renewal, modification or extension of any of the types of loan account listed above occurring on or after May 11, 2018 and does not apply to the initial opening of such accounts.    

As part of its response, FinCEN has set up a direct helpline for any BSA related question that may arise due to the COVID-19 pandemic, including those related to difficulties in meeting certain BSA obligations, and the timing requirements for certain BSA report filings.  To access this helpline go to www.finCEN.gov, click on “Need Assistance” click on the drop down list and select “COVID19.”

For the full article released by FinCEN use the following link:
https://www.fincen.gov/news/news-releases/financial-crimes-enforcement-network-provides-further-information-financial

For further information about beneficial ownership and PPP loans please use the following link and reference FAQ #18:
https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequenty-Asked-Questions.pdf

For any other beneficial ownership questions please use the following links:
https://www.fincen.gov/sites/default/files/2018-04/FinCEN_Guidance_CDD_FAQ_FINAL_508_2.pdf
https://www.fincen.gov/resources/statutes-regulations/administrative-rulings/exceptive-relief-beneficial-ownership

For additional information on detecting and preventing potentially fraudulent activity related to disaster relief efforts, please use the following link:
https://www.fincen.gov/resources/advisories/fincen-advisory-fin-2017-a007-0  

By: Matthew Waters

On July 1, 2020, changes to Regulation CC will go into effect that will require more funds to be made available to customers when certain holds are placed.  The Consumer Financial Protection Bureau and the Federal Reserve Board jointly made an amendment to Regulation CC on June 24, 2019, to increase funds availability to compensate for inflation.  These amounts will continue to be adjusted for inflation every five years using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and rounded to the nearest multiple of $25.

The July 1 changes to availability include:

• 229.10(c) – The minimum next-day availability will increase from $200 to $225.
• 229.12(d) – The cash withdrawal availability will increase from $400 to $450.
• 229.13(a) – The first $5,000 of funds availability for new account exception holds will increase from $5,000 to $5,525.
• 229.13(b) – The first $5,000 of funds availability for large deposit exception holds will increase from $5,000 to $5,525.
• 229.13(d)(2) –The $5,000 threshold for determining a repeat overdraft will increase from $5,000 to $5,525.
• 229.21(a) – The civil liability will increase from a range of $100 - $1,000 to a range of $100 - $1,100 in the case of individual action.  The bank’s liability in the case of a class action will increase from $500,000 to $552,500.

​
Financial institutions should revise their Expedited Funds Availability disclosures and policies and procedures at least by the effective date of July 1, 2020, as well as inform customers of these upcoming changes not later than 30 days after implementation on July 1.  Per the commentary in the final rule, a written change-in-terms notice is required to be sent to customers, but the notice can be included on account statements (and e-statements, as applicable). Also, remember Regulation CC applies to all transaction accounts (e.g. checking, NOW), not simply consumer accounts.  If your bank decides to send out the updated Expedited Funds Availability disclosure to satisfy the change-in-terms notice requirement, remember that the commentary to Regulation CC requires that the specific changes be highlighted in some manner to bring attention to the changes themselves.  Lastly, training should be provided to applicable staff before the effective date of the changes.
 
To access the Regulation CC final rule, use the following link:
https://files.consumerfinance.gov/f/documents/cfpb_regulation-cc-amendments-joint-fr-notice.pdf

By: Nash Cullens

On February 10, 2020, FinCEN issued guidance to help clarify a previous ruling on how to file CTRs relative to sole proprietors and entities operating with a trade name or “doing business as” name (DBA). The new rulings go in effect for discrete filers on April 6, 2020, and September 1, 2020, for batch filers.

The new ruling (FIN-2020-R001) was intended to help clarify how CTRs should be filed for sole proprietorships doing business under a single alternate name in a single location as well as for sole proprietorships doing business under multiple alternate names and locations. The ruling also helps to clarify how to file CTRs on legal entities doing business under a single alternate name in a single location as well as legal entities doing business under multiple alternate names in multiple locations.

The following links contain the rulings and guidance on how to file CTRs for each scenario.

Use the following link to access the full article released by FinCEN:
https://www.fincen.gov/sites/default/files/administrative_ruling/2020-02-10/FinCEN_CTR_Form112_508_1.pdf

Also, for examples on how to complete a CTR for each scenario, please reference the CTR FAQs # 26:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
​
For E-Filing instructions, please reference Page 90, Items 17 and 18 of the following links:
https://bsaefiling.fincen.treas.gov/docs/XMLUserGuide_FinCENCTR.pdf

By: Nash Cullens

On October 1, 2019, FinCEN issued new guidance to all E-Filers of discrete and XML batch filed Currency Transaction Reports in regard to completing Item 2 (Person involved in transaction) of Part I of the CTR form. Previously, FinCEN stated that if more than one option for Part I Item 2 applied, the bank was to only complete a single Part I (Person involved in transaction) for that person involved in the transaction and to aggregate all transactions conducted by that person in Item 21 (Cash in) or Item 22 (Cash out) of Part I for the transactor.

Due to CTRs being rejected and users of the BSA information not being able to fully understand how the transactions were being conducted, FinCEN has amended how line 2 of the CTR should be submitted. Now, for CTRs in which more than one option applies for Item 2 of Part I, the Bank should complete a separate Part I for each option of Item 2 that applies for the person involved in the transaction.

FinCEN issued this example to help clarify:

For example, if the Part I person makes a $5,000 deposit into their personal account and a separate
$7,000 deposit into the account of another person/entity, there will be one Part I on that person reporting option 2a on the personal deposit with that amount and account number in Item 21 “Cash in amount”. There will be a second Part I on that person reporting option 2b on the person/entity account transaction with that amount and account number in Item 21.

The effective date for this amendment has been extended from February 1, 2020, to September 1, 2020.

For the full article published by FinCEN, please use the following link:
https://bsaefiling.fincen.treas.gov/docs/FinCENNoticetoE-FilersRegardingCTRMultipleTransactionsEffectiveDate.pdf

For further clarification and examples, please use the following link and click FAQ #16:
https://www.fincen.gov/frequently-asked-questions-regarding-fincen-currency-transaction-report-ctr
 
Additionally, on November 22, 2019, FinCEN amended a recent statement released on October 1, 2019, in regard to indicating multiple transactions and aggregated transactions on Currency Transaction Reports. Previously, FinCEN stated that if a reportable transaction occurs such as a deposit, and a non-reportable transaction occurs such as a withdrawal under the $10,000 threshold, the Bank should indicate on Part I Item 3 (multiple transactions) that multiple transactions occurred. FinCEN amended this stating that multiple transactions should only be indicated if the multiple transactions that occurred are included in the CTR reportable amount. For instance, if multiple deposits occurred totaling over $10,000 dollars, multiple transactions should be indicated. However, if one deposit over $10,000 occurred as well as a withdrawal under $10,000, multiple transactions should not be indicated.

FinCEN released the following example to help clarify:

Item 3 Multiple transactions: Check Item 3 if multiple cash transactions of any
amount totaling more than $10,000 as cash in or more than $10,000 as cash out
(cash in and cash out transactions should not be combined) were conducted in a
single business day by or for the person recorded in Part I. For example, if a
customer makes a $12,000 deposit and a $300 deposit on the same day, item 3
should be checked. However, if a customer makes a $12,000 deposit and a $300
withdrawal, item 3 should not be checked.

Additionally, FinCEN further clarified that even though Item 3 of Part I (Multiple Transactions) and Item 24 of Part II (Aggregated Transactions) can be related, aggregated transactions should only be indicated if all the underlying requirements are satisfied.

For the full article published by FinCEN, please use the following link:​
https://bsaefiling.fincen.treas.gov/docs/FinCENNoticetoE-FilersRegardingCTRMultipleTransactionsInstructions.pdf

By: Nash Cullens

On December 3, 2019, the Board of Governors of the Federal Reserve System, the FDIC, FinCEN, the OCC in consultation with the Conference of State Bank Supervisors issued a statement regarding the legal status of commercial growth and production of hemp and requirements of Banks relative to the Bank Secrecy Act.  Due to the 2018 Farm Bill removing hemp from the Schedule I controlled substance list under the Controlled Substance Act, Banks are no longer required to file Suspicious Activity Reports on legal hemp related activities solely because they are engaged in the growth or cultivation of hemp in accordance with applicable laws and regulations. Banks are still required to follow standard SAR filing procedures and/or file a SAR in the case any suspicious activity arises.  Bank customers participating in hemp-related business activities are responsible for complying with the requirements of the 2018 Farm Bill and applicable state regulations.  Banks should consider filing SARs as appropriate when hemp related businesses are found to be operating in contravention of state and federal requirements.

Key points per the joint press release:

• Consistent with the USDA interim final rule, hemp may be grown only with a valid USDA issued license or under a USDA-approved state or tribal plan. Research and development initiatives authorized under the Agricultural Act of 2014 (2014 Farm Bill) remain in effect until one year after the effective date of the USDA interim final rule.
• A state or tribal government may prohibit the production of hemp, even though it is legal under federal law. The 2018 Farm Bill provisions related to USDA-approved state or tribal plans did not preempt state or tribal laws regarding the production of hemp that are more stringent than federal law.
• Separately, marijuana is still a controlled substance under federal law. The 2018 Farm Bill amended the definition of marijuana only to exclude hemp from the Controlled Substances Act.

​
For more guidance in relation to Marijuana Related Businesses Banks should reference FinCEN guidance FIN-2014-G001.

For more information relative to SARs and legal hemp related activities please refence the following link. https://www.fdic.gov/news/news/press/2019/pr19115.html

If your bank operates in Georgia, the Department of Agriculture’s website notes that hemp related agriculture licenses are not available at this time and will not be available until the state finalizes its hemp guidelines. http://agr.georgia.gov/georgia-composing-plan-to-comply-with-federal-and-state-hemp-guidelines.aspx