Treasury Department identifies Chinse nationals as opioid traffickers

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) identified Chinese national Fujing Zheng and the Zheng Drug Trafficking Organization (DTO) as significant foreign narcotics traffickers. © Shutterstock OFAC also designated one additional Chinese national, Guanghua Zheng, for his support to the Zheng DTO’s drug trafficking activities, as well as Qinsheng Pharmaceutical Co. Ltd., […]

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The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) identified Chinese national Fujing Zheng and the Zheng Drug Trafficking Organization (DTO) as significant foreign narcotics traffickers.

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OFAC also designated one additional Chinese national, Guanghua Zheng, for his support to the Zheng DTO’s drug trafficking activities, as well as Qinsheng Pharmaceutical Co. Ltd., for being owned or controlled by Fujing Zheng. OFAC also identified Xiaobing Yan (Yan) as a significant foreign narcotics trafficker. These actions are pursuant to the Kingpin Act.

“The Chinese kingpins that OFAC designated today run an international drug trafficking operation that manufactures and sells lethal narcotics, directly contributing to the crisis of opioid addiction, overdoses, and death in the United States. Zheng and Yan have shipped hundreds of packages of synthetic opioids to the U.S., targeting customers through online advertising and sales, and using commercial mail carriers to smuggle their drugs into the United States,” Sigal Mandelker, Under Secretary for Terrorism and Financial Intelligence, said. “OFAC and FinCEN’s (Financial Crimes Enforcement Network) coordinated action with U.S. law enforcement leverages Treasury’s authorities to confront the deadly synthetic opioid crisis plaguing America.”

FinCEN issued an advisory to alert financial institutions to schemes related to the trafficking of fentanyl and other synthetic opioids.

“The Bank Secrecy Act data that FinCEN collects, analyzes, and disseminates provides tremendous insight into the illicit financial networks and individuals fueling America’s deadly opioid crisis,” FinCEN Director Kenneth Blanco, said. “We are making the financial sector aware of tactics and typologies behind illicit schemes to launder the proceeds of these fatal drug sales, including transactions using digital currency and foreign bank accounts. Financial institutions must be on alert to red flags and other indicators of the complex schemes fentanyl traffickers are employing so that financial institutions can report and share relevant information with law enforcement, and ultimately help save lives.”

The Zheng DTO manufactures and distributes hundreds of controlled substances, including fentanyl analogues such as carfentanil, acetyl fentanyl, and furanyl fentanyl. Zheng created numerous websites to advertise and sell illegal drugs and touted its ability to create custom-ordered drugs that can’t be detected by customs and law enforcement officials when shipped through the mail, according to Treasury officials. The Zheng DTO also created analogues of drugs with slightly different chemical structures but the same or even more potent effect. They even manufactured adulterated cancer medication that replaced the active cancer-fighting ingredient with dangerous synthetic drugs, Treasury officials said.

Since 2000, more than 2,200 individuals and entities have been named pursuant to the Kingpin Act for their role in international narcotics trafficking. Penalties range from civil penalties of up to $1,503,470 per violation to more severe criminal penalties. Criminal penalties for corporate officers may include up to 30 years in prison and fines up to $5 million.

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FDIC approves changes to Volcker Rule

The Federal Deposit Insurance Corporation (FDIC) approved a rule to change the requirements the Volcker Rule, which prohibits banks from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds.© Shutterstock The Volcker Rule was established as part of the Dodd-Frank Act. It was a key provision that was designed […]

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The Federal Deposit Insurance Corporation (FDIC) approved a rule to change the requirements the Volcker Rule, which prohibits banks from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds.

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The Volcker Rule was established as part of the Dodd-Frank Act. It was a key provision that was designed to curb the type of speculative investments that led to the financial crisis of 2007-2008.

The new changes would alter the rule’s compliance requirements based on the size of a firm’s trading assets and liabilities. The most stringent requirements would be applied to banks with the most trading activity. It would also retain the short-term intent prong of the “trading account” definition only for banks that are not subject to the market risk capital rule prong. Further, it would replace the rebuttable presumption that instruments held for fewer than 60 days are covered under the short-term intent prong with a rebuttable presumption that instruments held for 60 days or longer are not covered.

In addition, the rule changes stipulate that banks that trade within internal risk limits are engaged in permissible market making or underwriting activity. It also streamlines the criteria that apply when a bank seeks to rely on the hedging exemption from the proprietary trading prohibition. Finally, it limits the impact of the rule on the foreign activities of foreign banking organizations and simplifies the trading activity information that banks are required to provide to the agencies.

“One of the post-crisis reforms that has been most challenging to implement for regulators and industry is the Volcker Rule, which restricts banks from engaging in proprietary trading and from owning hedge funds and private equity funds. Distinguishing between what qualifies as proprietary trading and what does not has proven to be extremely difficult. Meanwhile, banks that do relatively little trading are required to go through substantial compliance exercises to ensure that activities that have long been considered traditional banking activities do not run afoul of the Volcker Rule,” FDIC Chair Jelena McWilliams said.

The rule changes, if approved by all federal regulators, would be effective Jan. 1, 2020 with a compliance date of Jan. 1, 2021. The Office of the Comptroller of the Currency also approved the changes. The Federal Reserve Board, Securities and Exchange Commission, and Commodity Futures Trading Commission have not yet weighed in.

The American Bankers Association applauded the proposed reforms to the Volcker Rule.

“These improvements will allow bank supervisors to focus on systemic risk while providing the tailored and precise oversight that was the Volcker Rule’s original purpose,” Rob Nichols, ABA president and CEO, said. “We also applaud regulators for dropping the proposed accounting test, which was overly broad and unworkable. The decision to instead make meaningful improvements to the 60-day rebuttable presumption is consistent with the agencies’ focus on bright-line rules. We look forward to providing additional input that would simplify and streamline restrictions on covered fund investments while excluding funds that are clearly outside the Volcker Rule’s intent. These further reforms and exclusions will benefit a wide range of bank customers while improving efficiencies at banks subject to the rule.”

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Proposed SEC changes receive praise from legislator

Sen. Mark R. Warner (D-VA) is lauding the Securities and Exchange Commission’s (SEC) recent proposal to modernize the reporting and disclosure of human capital management practices. © Shutterstock Proponents of the action maintain human capital management disclosures lend insight into how companies compensate, train, retain and incentivize employees, adding several studies have determined human capital […]

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Sen. Mark R. Warner (D-VA) is lauding the Securities and Exchange Commission’s (SEC) recent proposal to modernize the reporting and disclosure of human capital management practices.

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Proponents of the action maintain human capital management disclosures lend insight into how companies compensate, train, retain and incentivize employees, adding several studies have determined human capital management disclosures are an important predictor of a company’s long-term success in a changing economy.

“I’m excited to see the SEC take this important step to recognize the significance of human capital management and the role it plays in the 21st-century economy,” Warner said. “Many of the ideas outlined in the proposed rule would go a long way in providing investors with the information they need to evaluate whether a company is making the appropriate investments in its workforce.”

Warner said he is looking forward to working with the SEC to develop a human capital disclosure regime for companies to help promote workforce training and investment, as well as long-term economic growth.

The SEC’s current human capital disclosure requirements are extremely limited, per proponents of the revisions adding the guidelines require disclosing only the number of employees, their median compensation, and CEO compensation. Last month Warner forwarded correspondence encouraging the SEC to heed the calls of investors and utilize its rulemaking authority to require companies across the board to provide further details relating to human capital management.

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CFPB appoints Robert Cameron for ombudsman position

Robert G. Cameron has been appointed to serve as the Consumer Financial Protection Bureau’s (CFPB) private education loan ombudsman.© Shutterstock Cameron joins the CFPB from the Pennsylvania Higher Education Assistance Agency, where he was a high-ranking official responsible for litigation, compliance, and risk mitigation efforts. In his new role officials said Cameron would be responsible […]

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Robert G. Cameron has been appointed to serve as the Consumer Financial Protection Bureau’s (CFPB) private education loan ombudsman.

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Cameron joins the CFPB from the Pennsylvania Higher Education Assistance Agency, where he was a high-ranking official responsible for litigation, compliance, and risk mitigation efforts.

In his new role officials said Cameron would be responsible for receiving, reviewing and attempting to resolve complaints from private student loan borrowers while also compiling and analyzing complaint data on private education loans and making appropriate recommendations to the Secretary of the Treasury, the Bureau Director, the Secretary of Education and Congress.

Consumer Bankers Association (CBA) President and CEO Richard Hunt said the organization is pleased the CFPB has filled the role and believes it should remain separate from the Office of Students.

“CBA looks forward to working with Mr. Cameron to help improve the student lending marketplace to benefit all borrowers,” Hunt said. “Through responsible lending practices and a 98 percent repayment rate, private student loans set students up for success. We believe there is a role for the federal government to help families most in need, but the current system has led to increased tuitions and double-digit default rates.”

The Dodd-Frank Act gave the Treasury secretary, in consultation with the CFPB director, the authority to designate the ombudsman.

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Lawmakers seek info from CFPB on unlawful student loan practices

Lawmakers are seeking information from the Consumer Financial Protection Bureau (CFPB) on its efforts to protect consumers from unlawful student loan servicing practices.© Shutterstock Financial Services Committee Chair Rep. Maxine Waters (D-CA), Education and Labor Committee Chair Rep. Bobby Scott (D-VA), and Oversight and Reform Committee Chair Rep. Elijah Cummings (D-MD) expressed concerns that the […]

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Lawmakers are seeking information from the Consumer Financial Protection Bureau (CFPB) on its efforts to protect consumers from unlawful student loan servicing practices.

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Financial Services Committee Chair Rep. Maxine Waters (D-CA), Education and Labor Committee Chair Rep. Bobby Scott (D-VA), and Oversight and Reform Committee Chair Rep. Elijah Cummings (D-MD) expressed concerns that the CFPB has taken actions that weaken its ability to protect student loan borrowers.

In a letter to CFPB Director Kathleen Kraninger, the chairs wrote that they are worried that student loan borrowers are getting potentially harmful and conflicting advice.

They cited former Student Loan Ombudsman Seth Frotman, who asserted in his resignation letter in August 2018 that CFPB leadership “has abandoned the very consumers it is tasked by Congress with protecting.” The position of Student Loan Ombudsman has been vacant since Frotman resigned.

The chairs are requesting the necessary records from the CFPB by Sept. 9.

They also sent a letter to Education Secretary Betsy DeVos expressing concern over the Education Department’s failure to protect consumers from student loan companies. The letter addresses recent reports that the department is shielding student loan servicing companies from state law enforcement and undermining the CFPB’s oversight of these companies.

“As chairs of committees with oversight responsibilities over the student loan industry, we are very concerned by reports that under your leadership, the Department of Education has failed to adequately oversee student loan servicers,” they wrote. “Reports indicate that improper practices by these servicers—including inaccurate determination of monthly payments, forbearance steering, and other practices—directly impact millions of Americans and have ripple effects on their families, communities, and the economy as a whole.”

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CUNA favors national data privacy standard

Credit Union National Association (CUNA) officials said the organization is supporting Federal Trade Commission (FTC) Safeguards Rule amendments addressing national data privacy standards.© Shutterstock “Strong data security laws will not stop criminals or rogue nation states from attempting to penetrate even the most sophisticated data and cybersecurity defenses,” Lance Noggle, CUNA senior director of Advocacy […]

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Credit Union National Association (CUNA) officials said the organization is supporting Federal Trade Commission (FTC) Safeguards Rule amendments addressing national data privacy standards.

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“Strong data security laws will not stop criminals or rogue nation states from attempting to penetrate even the most sophisticated data and cybersecurity defenses,” Lance Noggle, CUNA senior director of Advocacy & Senior Counsel for Payments and Cybersecurity wrote in correspondence to the FTC. “However, American consumers that trust their personal information to businesses deserve the most diligent effort by those businesses and entities to protect this data from theft and misuse.”

The CUNA is recommending the definition of a financial institution be broadened as much as possible to maximize consumer protection, adding enhanced data security requirements should always help safeguard consumers’ private information.

Presently 115 privately insured credit unions are subject to FTC Safeguards Rule requirements, with CUNA maintaining privacy will not have the protection Americans deserve until Congress passes a law with strong privacy and data security protections regulating based on the type of information handled or maintained.

Federally insured credit unions and banks comply with data security and privacy requirements established in the Gramm Leach Bliley Act and examined by federal and state regulators for compliance.

CUNA advocates on behalf of all of America’s credit unions, which are owned by 115 million consumer members.

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FHFA approves final rule allowing GSE’s to use third-party credit score models

The Federal Housing Finance Agency (FHFA) signed off on a rule that says third-party credit score models that can be used by government-sponsored entities, including Fannie Mae and Freddie Mac. © Shutterstock The rule implements the requirements in Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted on May […]

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The Federal Housing Finance Agency (FHFA) signed off on a rule that says third-party credit score models that can be used by government-sponsored entities, including Fannie Mae and Freddie Mac.

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The rule implements the requirements in Section 310 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, which was enacted on May 24, 2018.

The regulation requires a process for validation and approval of credit score models. The first phase calls for the solicitation of applications from credit score model developers. The second phase is the submission and initial review of submitted applications. The third phase is a credit score assessment, while the final step is an enterprise business assessment.

“One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,” FHFA Director Mark Calabria said. “The final rule we are publishing today is an important step toward achieving that goal.”

The rule will become effective 60 days after it is published in the Federal Register. Within 60 days of this effective date, FHFA will begin a review of the materials that the government-sponsored entities plan to use in the public solicitation process. After FHFA approves those materials, the GSE’s will make public the details of the solicitation process. FHFA will then determine the date that the initial solicitation will open for credit score model developers to apply.

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Department of Defense develops plan to correct contracting practices

The U.S. Department of Defense (DoD) developed a corrective action plan on contracting practices in the DoD’s Office of Net Assessment.© Shutterstock The plan was developed at the request of Sen. Chuck Grassley (R-IA), who sent a letter to then-Acting Secretary Mark Esper in July seeking more information on the matter. The letter highlighted potential […]

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The U.S. Department of Defense (DoD) developed a corrective action plan on contracting practices in the DoD’s Office of Net Assessment.

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The plan was developed at the request of Sen. Chuck Grassley (R-IA), who sent a letter to then-Acting Secretary Mark Esper in July seeking more information on the matter.

The letter highlighted potential problems concerning ONA’s contracts with Professor Stefan Halper, including a finding that ONA could not provide sufficient documentation that Halper conducted all of his work under applicable laws and regulations. The letter also cites flaws in ONA’s contract management and oversight processes.

“I’m glad to see the Defense Department has an action plan to address the suspicious contracting practices occurring in the department’s Office of Net Assessment. However, I remain concerned that Professor Halper did not comply with all of his contract requirements. Further, a plan is useless unless it’s put into action. The DoD Inspector General needs to be aggressive in ensuring DoD follows through on the implementation of its corrective action plan,” Grassley said.

Halper worked as a source for the FBI during the investigation of Russian interference in the 2016 elections.

Grassley’s letter followed an audit released by the DoD Office of Inspector General, which illustrated a systemic failure to manage and oversee the contracting process. Time and again, DoD’s challenges with contract management and oversight are put on display.

“It is far past time the largest, most critical agency in this country steps up and takes immediate action to increase its efforts to stop waste, fraud, and abuse of taxpayer dollars,” Grassley said. “In our meeting prior to his confirmation vote, Secretary Esper pledged to combat waste fraud and abuse at the Pentagon. He has a real opportunity to demonstrate that he is serious by immediately putting the screws to the Office of Net Assessment. The situation involving Professor Halper’s contracts is alarming and illustrates systemic problems within the Office of Net Assessment that has led to potentially millions of dollars in waste.”

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NASAA opens investigations into rise of crypto-related fraud

In the wake of regulators noticing a rise in potential crypto-related frauds, the North American Securities Administrators Association (NASAA) has opened probes into questionable cryptocurrency-related investment offerings.© Shutterstock NASAA officials said the 130 new investigations are in addition to 35 pending or completed enforcement actions since the beginning of this year. “Recent headlines of potentially […]

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In the wake of regulators noticing a rise in potential crypto-related frauds, the North American Securities Administrators Association (NASAA) has opened probes into questionable cryptocurrency-related investment offerings.

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NASAA officials said the 130 new investigations are in addition to 35 pending or completed enforcement actions since the beginning of this year.

“Recent headlines of potentially new cryptocurrency products and the near tripling in value of some cryptocurrencies and the sharp increase in market capitalization for all cryptocurrencies are again creating an environment that attracts white-collar criminals, bad actors, and other promoters of illegal and fraudulent securities schemes,” Michael S. Pieciak, NASAA president and Vermont Commissioner of Financial Regulation, said. “Investors should be mindful of the hype and be aware of the risks when considering whether to jump into cryptocurrency-related investment products.”

The NASAA said among the factors to be considered to address potential fraudulent activity are volatility. Cryptocurrency markets are highly volatile, making them unsuitable for most investors looking to meet long-term savings or retirement goals; cryptocurrency and many crypto-related investments are subject to little regulatory oversight, and there may be no recourse should the cryptocurrency disappear due to fraud or a cybersecurity breach; and cryptocurrency or crypto-related investments only exist on the internet – and issuers can be located anywhere in the world, so it may be impossible to trace and recover lost funds through the courts.

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NY leads multistate probe of payroll advance industry

New York’s Department of Financial Services (DFS) said last week it is leading a multistate investigation of the payroll advance industry as a means of examining unlawful online lending allegations.© ShutterstockLinda A. Lacewell “High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious […]

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New York’s Department of Financial Services (DFS) said last week it is leading a multistate investigation of the payroll advance industry as a means of examining unlawful online lending allegations.

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Linda A. Lacewell

“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers,” Financial Services Superintendent Linda A. Lacewell said. “Protecting consumers is our top priority and New York is leading the charge to expand the investigation of illegal online lending by including regulators from ten additional states and Puerto Rico.”

Lacewell said the agency would also partner with peer regulators to safeguard consumers from predatory lending and scams ensnaring families in endless cycles of debt.

The scope of work, officials said, is rooted in determining whether companies are in violation of state banking laws, including usury limits, licensing laws and other applicable laws regulating payday lending and consumer protection laws.

The following regulators have joined DFS in investigating the payroll advance industry:

Connecticut Department of Banking;
Illinois Department of Financial Professional Regulation;
The Office of the Commissioner for Financial Regulation in the State of Maryland;
New Jersey Department of Banking and Insurance;
North Carolina Office of the Commissioner of Banks;
North Dakota Department of Financial Institutions;
Oklahoma Department of Consumer Credit;
Puerto Rico Comisionado de Instituciones Financieras;
South Carolina Department of Consumer Affairs;
South Dakota Department of Labor and Regulation’s Division of Banking; and
Texas Office of Consumer Credit Commissioner.

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