Regulatory Risk Report March 1, 2016

Quote of the Week •“We must consider bolder, transformational options...including breaking up large banks into smaller, less connected, less important entities or turning banks to public utilities.” - Minneapolis Fed head, Neel Kashkari

Articles in This Issue Photos by Denise Jones Adler

US Banking: Fed president says too-big-to-fail still a threat; OCC revised civil penalty policy; FDIC large bank records for depositors in case of instability; Fed reduce dividend payments to large banks; OCC installment loan exam– page 2.

US Consumer: CFPB near-term priorities; Reform of arbitration clauses in client contracts; CFPB rural area appeals; NCUA chair regulatory relief and membership expansion: CFPB flexible in application of rules to credit unions– page 3.

US Investment: SEC, FDIC broker dealer liquidation; FINRA compliance culture exam; FINRA bond confirm mark-ups; Treasury muni issuer political divisions; MSRB compliance advisory; MSRB non semi-annual bond valuations– page 4.

International: FSB, G20 work program and Shanghai communique; IOSCO review of financial benchmark; FSB re-use of non-cash collateral in finance trades; APRA uncleared derivatives margin; IAIS confidential G-SII reporting– page 5.

EU: EBA launches 2016 stress test; SRB resolution reporting risk template; ESMA review money market rule adoption; ESMA on benchmark indices; EC response to EP on solvency II revision; ECB institutional protection scheme – page 6.

UK: PRA, FCA reject EU variable bonus cap interpretation; PRA governance of UK branch of non-EEA institution; PSR payment structure ownership; FCA fund manager liquidity risk management; FCA services for ageing clients – page 7.

AML & Enforcement: OCC enforcement of BSA; NFA cyber security exam; FATF money value transfer; US Gibraltar Bank AML fine; NYAG municipal bond bid-rigging enforcement; CFPB Citi debt sales practice and subpoenas– page 8.

Regulatory Watch List By the book Many banks trading at under book value, regulations cited as key factor in lower future profitability. Others say lower compensation required, although some that tried doing beyond the CEO, had to backtrack plans.

Unwilling Regulators take months to decide on credibility of living wills, purportedly for immediate use in crisis. FDIC remains in proposal stage of rule requiring large banks to be able to aggregate bank accounts by customer. Proportion UK interpret CRD differently to EBA, in way that allows banks more discretion to pay high bonuses. Bankers presume greater UK discretion after Brexit, but PRA head says regulation would not suddenly disappear.

Re-stress EU sets bank stress test without fail mark, as discretion left to nations to set required levels of TLAC. Fund managers oppose regulatory extension of tests against scenario of large-scale redemption and little liquidity. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 1 US Banking Fed Kashkari TBTF Still a Threat FDIC Large Bank Records of Depositors On Feb. 16, Fed Minneapolis president Kashkari On Feb. 17, FDIC proposed recordkeeping rules to said too-big-to-fail (TBTF) banks are still a threat. speed-up access to deposits, if a bank were to fail. . Goal is to create environment, in which large . Requires 36 banks above 2mn insured deposit banks can make a big mistake without bailout. accounts, to improve recordkeeping capacity. . Reforms of capital and liquidity, living wills, . To enable posting deposits within 24 hours to stress tests are sensible but may be inadequate. protect customers if the bank were to collapse. . Regulators can probably deal with one large . And obtain in-house beneficial ownership for bank failure within a healthy, stable economy. pass-through accounts, for speedier resolution. . But is too much of a risk if one or more failed . Proposal would require all large banks to keep during period of weakness or risk in economy. complete and accurate data on each depositor. . Costs for bailout will be high, while certainty . And to ensure IT systems can calculate funds of effectiveness of DFA tools are low, he said. due to each depositor, in 24 hours of a failure. . Seriously consider bolder options, breaking up . Seek rapid access to insured funds in the case large banks into smaller, less connected firms. of failure, as FDIC does in smaller resolutions. . Turn large banks to public utilities by forcing . Difficult if using complex account structures, them to hold so much capital they cannot fail. systems, or multiple legacy deposit platforms. . Or imposing tax on leverage across financial . Some banks have over 50mn insured deposit system to reduce these risks wherever they lie. accounts, after having acquired other entities. . Global businesses do not need global banks as they can manage multiple bank relationships. Fed Reduced Dividend Rate Large Banks . While some questions that cannot be answered On Feb. 18, Fed issued rules on dividend payments now, policy delay is not the correct response. to large banks, to implement parts of the FAST act . Fed will discuss with regulators, researchers, . Act reduced dividend rate applicable to large industry, on possible and achievable options. member banks with total assets of over $10bn. . To lower of 6%, or the recent 10year Treasury OCC Civil Penalty Policy auction rate, before the payment of a dividend. On Feb. 26, OCC issued a revised policy on fines, . Rate is applied to shareholdings of individual defined aspects of misconduct or mitigation to set. institutions members of Reserve Bank system. . Unlike prior policy, new one has categories by . The dividends paid for other smaller member asset size, from under $60mn to over $150bn. banks, will continue accruing at a rate of 6%. . While the fines can be larger than before, they . Adjustment to accrued dividend when Reserve may not exceed 1% of the institution’s assets. Bank issues or cancels a bank's capital stock. . Also cover institution-affiliated parties (IAPs) including official, agent or employees of bank. OCC Installment Loan Exams . For an IAP, a fine can exceed $175,000, first On Feb. 12, OCC issued exam guidance on banks determined without considering ability to pay. which have a business in making installment loans. . Based on the level of egregiousness, unsafe or . Guidance for examiners to assess the quantity unsound practices, and enforceable conditions. of risk associated with installment lending. . Where conditions are in writing, and violation . And to assess the quality of risk management that can include reckless and unsafe practices. used by bank to monitor installment lending. . Misconduct factors include intent, if knew or . Also updated guidance on administration of should have known breach, and its incentives. installment lending practices and controls. . Continuation after notification by regulators, . And on the processes necessary to effectively concealment from regulators, board, auditors. manage the associated risks from the activity. . Financial gain or other benefit, direct as well . Processes to examine include underwriting or as indirect, as a result of acts of misconduct. account eligibility criteria, use of charge-offs. . Loss or harm to consumers, non-financial loss, . Risk management and control system and any in reputation, operational and compliance risk. third-party management and outsourcing used. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 2 US Consumer CFPB Near-Term Priorities NCUA Chair Regulatory Relief On Feb. 25, CFPB director Cordray spoke on near- On Feb. 22, NCUA Chair Matz and board member term priorities, based on levels of consumer harm. McWatters discussed relief initiatives for 2016. . Mortgage market where lenders and servicers . Field-of-membership rule for credit unions to fairly serve range of creditworthy borrowers. raise member base, double number involved. . Student loan market serviced in a transparent, . Other goals are marketing to millennials, and fair way, that helps students repay their debt. adopt strong industry-cybersecurity measures. . Consumer reporting market that contains more . McWatters outlined regulatory relief program accurate data, so inclusive of more customers. in relation to burdens that credit unions face. . Market is free of discrimination, having equal . To reduce threat to the insurance fund; review consumer access for small business lending. out-of-date rules; and lengthened exam cycle. . Consumers savvy with own finances, reliable . Examiner accountability and transparency of tools and skills to build up financial capability. exam finding and stress testing methodology. . Open-use credit markets, where payday and . Also focus on addressing fraud, adopt better installment lenders improve business models. practices from elsewhere in finance sector. . Payday lenders business model for consumers to use credit as needed, and are able to repay. . Debt market where collector substantiate loan, communicates with debtors in respectful way. . Consumers able to effectuate rights and hold firms accountable for their unlawful conduct. CFPB Director on Arbitration Clauses On Feb. 18, CFPB director Cordray spoke on need to reform contract clauses on consumer arbitration. . CFPB arbitration study found clauses blocked class action proceedings in any type of forum. . Found consumers individually, did not pursue disputes in arbitration or in court, as a result. CFPB Rules for Credit Unions . Firms that retained arbitration clauses had no On Feb. 23, CFPB director spoke on flexibility in price cuts over ones that dropped such clause. applying consumer laws for credit unions in DFA. . The clauses have severely limited consumer . CFPB supervises credit unions having assets options to get just dispute resolution process. over $10bn, can customize rules for their risk. . Consider new rules to ban arbitration clauses . Oversees non-bank mortgage lender servicers, on cards, bank accounts, auto /student loans. to make a level playing field for credit unions. . Also to require companies to send CFPB data . Qualifying mortgage rule on the ability-to-pay on their initial claims and arbitration awards. has expanded lending made by credit unions. . How to exempt firms in rural or underserved CFPB Rural Area Appeals areas from escrow for high-priced mortgages. On Feb. 18, CFPB consulted on process to appeal . And to continue to let them originate balloon- a rural area designation, per rural communities act. payment mortgages, in certain circumstances. . Help Act requires CFPB to create an appeals . Initial CFPB exams for compliance with new process to designate “rural” geographic areas. mortgage disclosures corrective, not punitive. . Amends Dodd-Frank Act to create an appeals . Small-dollar ability-to-pay proposal similar to process to add further areas classified as rural. Card Act provisions for credit card issuers by . Provides an exemption for loans made in rural requiring verification of prospective borrower areas, from the CFPB qualified mortgage rule. income, financial obligations, credit history. . A rural classification helps community banks . Lender could avoid for loans under 46 days by give further mortgages to qualified borrowers. 60-day cooling-off period between rollovers. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 3 US Investment SEC FDIC Broker Liquidations Treasury Muni Political Divisions On Feb. 17, SEC proposed orderly liquidation rule On Feb. 23, IRS proposed a definition of political for large broker-dealers, jointly issued with FDIC. subdivision that is required for municipal issuers. . Issuance of liquidation rule was mandated by . Seeks new definition of political subdivision the provisions of the Dodd-Frank Act (DFA). (PS) to be used by tax-exempt bond issuers. . Alternative insolvency SIPC becomes trustee, . To qualify, a bond must meet test of sovereign while FDIC is receiver of the liquidating BD. power, governmental purposes, and control. . Ensure customers are treated at least as well . Sovereign powers if entity exercise substantial as they would be in a liquidation under SIPA. amount of at least 1 of 3 sovereign powers. . Provide clarification re notice and application . These powers are: eminent domain, police of protective decree to be filed at OLA outset. powers, and power to raise taxable income. . On transfer of customer account to bridge BD, . Governmental purpose requires a public aim, the roles of SIPC trustee, and FDIC receiver. and the PS to actually carry out that purpose. . Permits FDIC to create a successor BD and . Entity must provide significant public benefit; transfer customer accounts and assets to it. any private benefit is incidental or minimal. . FDIC may also transfer non-customer assets . Subdivision governmentally-controlled, using and liabilities when they consider appropriate. three non-exclusive tests of who controls it. . Control benchmark are right/power to approve FINRA Compliance Culture Exam or remove a majority of PS governing body. On Feb. 17, FINRA sent sweep letter to ask broker dealers how they establish a culture of compliance. MSRB Compliance Advisory . How establish cultural values, including role On Feb. 24, MSRB issued first advisory to BDs on of board, whether at BD or parent entity level. compliance risks which can undermine confidence. . Steps begun or completed in past 24 months to . Core parts of MSRB fair practice regulation, promote, strengthen or change firm’s culture. protect investors and ensure fair conduct. . Processes by which a firm communicates its . Use as a tool to supplement the assessment by cultural values, and tone from top, to all staff. firms over adequacy of their own compliance. . And ensures that the values have been adopted . On fair pricing and best execution; suitability and applied by all levels of their management. obligations, disclosure and need to deal fairly . How BD assesses and measures the impact of . Ban on underwriting, restricted gifts, gratuity, cultural values and if help improve behaviors. supervision, and muni qualification standards. . Whether policy statements, procedures, reflect . Includes new best execution rule in the muni the assessments and measures the firm found. market, which are effective on Mar 21, 2016. . How firm identifies policy breach that subvert . If act as principal, aggregate price including cultural values, potentially rogue subcultures. mark-ups, must be fair and reasonable. FINRA Bond Confirm Mark-up Finalized MSRB Non Semi-Annual Bonds On Feb. 26, FINRA approved price disclosure rule On Feb. 23, MSRB proposed calculation for bonds for mark-ups to retail investors in fixed-income. without semi-annual interest, over 6 months left. . Requires a firm to disclose, on retail customer . Amended formula accounts for actual interest confirmation, level of mark-up or mark-down. payment frequencies, due on such securities. . If firm buy corporate or agency bond after buy . This eliminates presumption in calculation same security, as principal, on same trade day. that interest is paid on semi-annual basis, . Firm would disclose on customer confirmation for bonds with periodic interest, and more their mark-up from a bond’s prevailing price. than one coupon period until redemption. . Give reference (by hyperlink if electronic) to . Rather than calculate for variable of yield trade-price data, in same security on TRACE. divided by 2 presumed paid semi-annually. . No disclosure for transactions in fixed-price . New formula divides yield by M, for number new issues, or bonds held by firm over a day. of payment periods per year on the security. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 4 International FSB, G20 Work Program 2016 APRA Uncleared Swap Margin On Feb. 27, FSB chair set out 2016 work program On Feb. 25, APRA proposed rules on margin and to G20 finance ministers for meeting in Shanghai. risk management for uncleared derivatives trades. . Market turbulence underlined a need to build . Entity must exchange variation margin and more resilient financial institutions, markets. initial margin with a covered counter-party. . Concerns that banks have more to do to adjust . Use zero threshold in exchange of variation long-term business model to low growth/rates. margin, and post and collect on gross basis. . Committed to the timely and comprehensive . Ensure that initial margin is held in a manner implementation of financial reform measures. that is legally certain in event of insolvency. . Support Basel III improvements, and avoiding . Also collect eligible collateral to meet margin further large increase in overall bank capital. requirement after applying risk-based haircuts. . Improve global systemic insurers assessment, . De-minimis threshold of AUD 750,000 before and develop new insurance capital standards. need total variation margin and initial margin. . Effective implementation of G20 / OECD tax . Requires risk mitigation or trade relationship project re base erosion, profit-shifting (BEPS). documentation and counterparty confirmation. . Redouble efforts to deal with all sources of, . Entities to conduct portfolio reconciliation and technology and channels of terrorist financing. compression with frequency reflecting risk. . Agreed urgency of environmental challenges, . Do reasonable due diligence on counterparty, and importance of green finance mobilization. ensure rigorous dispute resolution procedures. IOSCO Financial Benchmarks Review On Feb. 26, IOSCO issued report on implementing principle of three benchmark interbank offer rates. . Review follows Jul. 2014 report on movement towards adoption of 19 financial benchmarks. . IOSCO found major progress on principles on governance, transparency and accountability. . Particularly areas such as conflicts of interest, consulting stakeholders and internal oversight. . But more work, and time, needed in areas for the design and quality of the benchmarks. . That review, focused on tying rates to actual market transactions, is in the planning stages. IAIS Confidential G-SII Reports On Feb. 17, IAIS issued guidance for reporting of FSB Non-Cash Collateral Reuse G-SII capital during the confidential testing period. On Feb. 23, FSB issued report on measures of non- . For reporting basic capital requirement BCR, cash collateral reuse in financial market financing. and higher loss absorbency requirement HLA. . Re-use increases availability of collateral and . To be reported from 2014 to 2018 by global reduces transaction and liquidity/funding cost. systemically important insurers (G-SIIs). . However, it may also cause stability risk, and . After G-20 Nov. 2014 endorsement for BCR, interconnectedness among market participant. G-SIIs reported data to supervisors from 2015. . And contributes to excess leverage of a single . IAIS uses existing infrastructure, and process entity and across financial system as a whole. to safeguard any confidential data submitted. . Authorities need more understanding and data . Extended same confidential reporting process on collateral reuse and impact on stability risk. already in use for BCR, also apply for HLA. . Report considers data measures for non-cash . Firms should use 'best effort’ to provide data collateral re-use, and of related data elements. items that may not be immediately available. . New data standards could be included within . National group-wide supervisors should verify existing FSB securities finance data standards. the submitted data before passing this to IAIS. Regulatory Risk Report: March 1, 2016 5 EU EBA Launches Stress Test 2016 ESMA Indices Benchmark On Feb. 24, EBA launched EU stress test exercise On Feb. 15, ESMA issued consultation on indices and methodology for 51 banks with 70% of sector. used as benchmarks and the role of administrators. . No single pass/fail threshold is defined as the . Defines benchmark as the index to which the results will instead inform 2016 SREP round. payment under financial instrument relates to. . Supervisory review and evaluation processes . Index must be published or available to public (SREP) will decides on capital resource level. and regularly determined by underlying assets. . For consistency, will assume a static balance . Not limited to securities, also extends to other sheet, as it precludes bank mitigating actions. instruments and action in the creation of them. . Discuss results with bank under SREP process . Oversight by benchmark administrators to set where latter may consider mitigating actions. up permanent and effective review functions. . Adverse scenarios were designed by ESRB for . Function is responsible for an annual review, systemic risk that are material threat to banks. methodology, control framework, procedures. . Uses a deviation of EU GDP from baseline by . Administrator to consider whether input data 3.1% in 2016, 6.3% in 2017, and 7% in 2018. appropriate or verifiable, real trades preferred. . Shock in real estate prices, and across foreign . Administrators to provide detail to allow users exchange rates in Central and Eastern Europe. to understand how a benchmark is calculated. . Methodology used should be transparent and SRB Resolution Reporting ensure reliability and accuracy of calculation. On Feb 22, Single Resolution Board SRB began to . Require administrators to produce a code of collect data for bank resolution plans and capital. conduct for contributors to each benchmark. . To determine a bank’s minimum requirement for own funds and eligible liabilities (MREL). EC to EP Solvency II Infrastructure . And required for resolution planning from all On Feb. 19, EC wrote to EP ECON on solvency II banking groups under its direct responsibility. capital, equivalence on infrastructure investments. . To prepare resolution plans, SRB is required . This is aimed at driving economic growth, and to set MREL target levels for banks in 2016. have been awaited by EU insurance sector. . To meet goals and analyze liability structure, . Political urgency of the measure had required SRB issued liability data template, guidance. a shortened consultation period in Aug. 2015. . BRRD establishes new category of liabilities, . Justified method of calibrating infrastructure, which do not correspond to those in the SSM. as being based on EIOPA Sep. 2015 advice. . Acknowledged challenges for banks, and thus . Advice was based on an analysis of the data, has adopted gradual approach to collect data. comment received during public consultation. . Mandatory data requests are minimum under BRRD, other data only on a best efforts basis. ECB Institutional Protection Schemes On Feb. 19, ECB proposed guidance for assessing ESMA Money Market Review institutional protection schemes (IPSs) under CRR. On Feb. 16, ESMA issued review of implemented . CRR defines IPS as contractual arrangements guidelines on money market funds in 8 countries. within a group of banks to protect a member. . In 7 of 8 countries, guidelines are in force or . IPSs are now recognized in three euro area about to be, only Hungary is still outstanding. member States: Austria, Germany and Spain. . All but Malta implemented the guidelines, but . About 50% of all banks in the euro area are with delay compared to the scheduled date. members of an IPS, and hold 10% of assets. . Provisions related to the short-term money . Recognition of IPS leads to a lower capital market funds were fully applied in 4 countries. requirement being applied to individual banks. . All the competent authorities have applied the . This is comparable to the way that entities in a guideline without using transitional provision. consolidated banking group are treated. . Hungary implemented guidelines into law by . IPS is eligible only if meets legal requirement, soft-law measures, so is not binding on funds. e.g. is able to support members in difficulty. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 6 UK PRA, FCA Amend EU EBA Bonus Caps FCA Fund Manager Liquidity Management On Feb. 29, PRA and FCA stated how the UK will On Feb. 29, FCA issued guidance on management adopt EU EBA remuneration policy of Dec. 2015. of liquidity by investment advisors in their funds. . EBA limit awarding of variable remuneration . Managers should disclose the impact from low by bank to 100% of staff's fixed remuneration. liquidity on volatility of investors’ fund return. . PRA and FCA stated disagreement with EBA . Use of specific tools or exceptional measures interpretation of applying bonus cap per CRD. and any affect on investor’s redemption right. . UK to use proportionate, risk-based approach . Ensure fund redemption arrangement suitable based on nature of an entity and its activities. for investment strategy, stages of fund cycle. . Since bonus cap, firms increased fixed pay as . Regularly assess liquidity demands, including proportion, but the total pay remained similar. redemption, collateral calls, other obligations. . Makes harder for firms to adjust variable pay, . Independent function monitor portfolio bucket in case of worsening in their financial health. exposures and report breaches versus limits. . Any EU extension of bonus cap to all CRD- . Manager should avoid incentivizing any panic regulated firms, would exacerbate these risks. driven redemptions that can contribute to runs. . Large, systemically important CRD-regulated . Establish governance processes to ensure that firms will continue to apply the EU bonus cap. the interest of all fund investors are protected. . But, no bonus cap on smaller firms, PRA/FCA . Use exceptional liquidity tools, such as swing retain approach to setting fixed variable ratio. prices, levy, deferred redemption, suspension. PRA Non-EEA UK Branch Governance On Feb. 26, PRA issued policy on governance for UK branches of non-EEA banks, investment firms. . Comprehensive processes, also proportionate to the nature, scale and complexity of the risk. . Robust governance and organization structure, and statement of responsibility for individuals. . Areas of regulated activity senior manager is responsible for, and division of responsibility. . Clearly document procedure and organization, with good internal reporting, communications. . Persons directing business should be executive director, or person executing executive power. FCA Services for Ageing Clients . Consider the appointment of a branch head of On Feb. 22, FCA consulted on ageing population risk, and a risk management oversight team. in financial services and impact of pension reform. . FCA wants to understand the services used by PSR Payment Structure Ownership seniors, remove barriers to make accessible. On Feb. 25, PSR issued a report on ownership and . New FCA team has been created, to look at competition in UK payment service infrastructure. challenges facing seniors in financial services. . Entry barriers exist, as payment infrastructure . People aged 50-60 tend to underestimate life controlled by payment service providers PSPs. expectancy, fail to consider risk of longevity. . Now a lack of incentives for operators to seek . Possible cohort of older people who are over- alternative providers, to benefit service-users. confident in ability to make sound decisions. . Undertake competitive procurement exercises . Savers 55 and over may withdraw as much of before the renewal of current service contract. defined contribution pension savings as wish. . Improve the interoperability and international . Older people suffer more age discrimination, message standards for FPS, Bacs and LINK. financial services exempted prohibition rules. . Divestment by a few large bank shareholders, . Mortgage review found stricter affordability including PSPs, of their interest in VocaLink. criteria, and most have a maximum age limit. Reg-Room, LLC Regulatory Risk Report: March 1, 2016 7 AML & Enforcement OCC Enforcement of BSA Compliance US Gibraltar Bank AML Fine On Feb. 29, OCC issued processes for enforcement On Feb. 25, FinCEN, OCC fined Gibraltar Private actions, in cases of deficiencies on BSA and AML. Bank $4mn for AML, not following up red flags. . OCC uses various methods to notify banks of . Failed to timely file 120 SARs, covered nearly weaknesses found in their systems or controls. $558mn in Ponzi scheme-related transactions. . When rising to level of non-compliance, OCC . Enabled a $1.2bn fraud by jailed lawyer Scott must issue a cease-and-desist (C&D) order. Rothstein, 2013, which agencies fined $90mn. . Before C&D issued, OCC give bank notice of . Transaction monitoring system of incomplete pendency, and 15-day opportunity to respond. and inaccurate account opening data on client. . After action determined, OCC send bank final . Customer risk profile gap delayed compliance exam report and their proposed C&D order. staff in identifying unusual account activities. . If bank opposes, OCC files charges to pursue . Automated monitoring system generated high administrative hearing, and may impose fines. number of alerts, caused delay in SAR review. NFA Cyber Security Program Exam NYAG Muni Bond Bid-Rigging On Feb. 29, NFA issued self-questionnaire exams On Feb. 24, NYAG issued settlement on muni bid for information systems security programs (ISSP). rigging by Natixis $29.9mn and Soc-Gén $26.7mn. . Sections on FCM, FDMs, IBs, CPO and CTA . Investigation found fraud and anti-competitive AML, BCS recovery, ethics, privacy, FAQs. conduct by banks in muni bond derivative bid. . Firms should have practices to supervise risks . Bid to invest bond proceeds until needed was of unauthorized access, and attack on systems. rigged by banks, and by brokers on its behalf. . Leaves exact form of ISSP to firm, it must be . The agreed-on loser submitted noncompetitive approved in writing by a firm's CEO or CTO. bids, winners falsified as arms-length bidding. . Must use governance framework for informed . Borrowers paid more as result of misconduct, decision-making and escalation of ISSP issue. and jeopardized bond buyers’ tax exemptions. FATF Money Value Transfers CFPB Citi Debt Sales Practices On Feb. 19, FATF issued guidance on money and On Feb. 23, CFPB ordered Citibank pay $3mn fine value transfer service via cash, money order, card. and $4.8mn relief. for debt sales and legal filings. . Countries should ensure MVTS providers are . Citi sold credit card debt to debt buyers which registered, under supervision and compliance. had inaccurate or inflated APR information. . Subject firm to customer due diligence, record . In some cases, Citi claimed APR on the debt keeping, and suspicious transaction reporting. was above 29% when it was actually only 0%. . Financial entity subject to a higher risk-level, . Also delayed forwarding, to debt buyers, those should be required to use enhanced measures. payments that were made to it by card holders. . FATF does not support wholesale termination . Citi also provided law firms with affidavits to or restriction of business services with MVTS. affirm accuracy of mortgage amounts owed. . MVTS can provide lower-income individuals . Law firms altered dates of the affidavits or the greater access to financial service protections. amounts owed, before filing them with court.

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