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
​

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