Week In Compliance: Local News uses beauty as click-bait

Hello on this crisp-cool Friday here in New York. Excuse my unexplained absence, the reason was personal.

Rochelle Yazzie

News from Albuquerque: “Southwest Capital Bank has hired Rochelle Yazzie, who will work as an Operational Compliance Specialist.” Okay, so, this isn’t exactly new to the compliance world at large, but I find it funny that this is news to Albuquerque, especially for someone who is going into a role at the bottom of the compliance organization. Just goes to show you how small that town is. Yazzie showed up on the local newspaper’s “People On the Move” column. – Albuquerque Business First 

“Dozens of Swiss banks have been spilling their secrets this year as to how they encouraged U.S. clients to hide money abroad” – WSJ

New CFPB proposal would publish arbitration awards given to consumers from banks and credit unions, making it part of public record like court cases. – Tina Orem from Credit Union Times 

God giveth in investment returns – Amvona Fund LP is a hedge fund run by a Greek Orthodox church, which exempts it from compliance from SEC. It manages $20 Million. – Claire Groden at Fortune

SCCE‘s 2015 Compliance Officer Compensation Survey is out, HERE!

2015 Compliance and Ethics Officer Salary SurveySome takeaways from the aforementioned survey: It is does not include non-managing compliance officers, it does not include CAMS or CRCM or many of the technology certificates, it does not include many people in financial services (just 8%). 50% of respondents who make more than $1M in compensation per year had JD’s. And, if presentation matters to you, it used Microsoft Excel’s default setting for tables.

KeyCorp seeking $4 billion purchase of First Niagara.” (The Buffalo News). Buffalo, NY is obviously worried that this could mean job losses for the area. For me, I’m observing KeyCorp executing on a long tradition of itself: buying smaller banks. KeyCorp’s ambition is to become another national bank, the likes of JPMorgan Chase, Citigroup, Wells Fargo, and Bank of America Merrill Lynch. There are couple other contenders for such a role: PNC, USBancorp, Capital One, Suntrust, BB&T, Fifth Third, Citizens, M&T, and Huntingdon.

Singapore‘s tax authority collects $217 Million in unpaid taxes. (The Business Times). Even on the island of prosperity, tax evasion happens.

Goldman Sachs fined $50M by NY regulator for leaking data from Federal Reserve Bank of New York. (ValueWalk).

Jobs In Compliance

Opinion: 3,415 American renounced their citizenship

American immigration policy is a problem. Not just do poor people from other nations want to come here but rich people from America want to leave. In 2014, 3,415 people gave up their American citizenship. As of September 30, 2015, 3,221 people gave up their citizenship. That’s 15 times more than in 2008. (Sophie Yan of Local Syracuse). This is a result of FATCA, the tax law that requires reporting assets held by American in foreign jurisdictions. The law’s reach is long, just $10,000 in assets. While it is illegal to renounce American citizenship because of the tax bill associated with foreign assets, the the law faces a steep cultural hill. America was founded on the fact that it did not want to pay taxes to Britain. The problem with many of the new financial regulations is that they don’t tackle the primary problems, they tackle tertiary ones. FATCA is no different. Reporting foreign assets might be a solution to getting information, but proving that a person gave up citizenship due to taxes is quite difficult. Without explicit evidence, the only evidence that would exists, at best, are circumstantial. Plus, not all jurisdictions cooperate with the US, and even when they do, they don’t cooperate with laws that would be financially beneficial to them. FATCA is one of those laws. They could be giving up valuable tax dollars in various forms if the interested person finds the jurisdiction supporting US tax policies that was being evaded. The other problem with jurisdiction is that FATCA will likely reveal tax avoiders, not tax evaders. The difference is that tax avoiders are avoid taxes using the rules while tax evaders are not paying taxes they are supposed to be paying either by misclassifying accounting rules or simply hiding the funds through some legal convolution. The solution for the immigration problem is extremely complicated. Plus, I don’t have an integrated, holistic one to share with you. I just wanted to point out that regardless of the law, the culture of not paying taxes is the primary problem. The solution really should be cultural, not legal.


How do you like the new weekly round up?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

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Week In Compliance: Wolverine charged by SEC

credit: j4p4n

SEC charged Wolverine Trading LLC and Wolverine Asset Management LLC with failing to prevent insider trading. – SEC

Payday lender will be able to sue FDICFRBOCC – “A U.S. district court judge has ruled that a case brought by the Community Financial Services Association of America Ltd. against the Federal Deposit Insurance Corp., Federal Reserve Board and the Office of the Comptroller of the Currency can move forward. The plaintiffs are seeking injunctive relief from what they argue is agency involvement in the Department of Justice’s Operation Chokepoint initiative against payday lending.” – Dodd-Frank Update

“Costs of overhauling internal systems could deal some insurers a hard blow.” – John Everington at The National, reporting on S&P

“[Fee disclosure rule] was a good place to start. Hopefully this will create a momentum for increased transparency with other fees,” said Judith Shaw, President, North American Securities Administrators AssociationTed Knutson at Financial Advisor

Brian Grazer, renown film producer, had Tom Cruise lead the cost compliance effort on Far And Away. – Business Management Daily

IRS to scrutinize retirement accounts – “Citing what it calls a ‘historical pattern of non-compliance,’ the Internal Revenue Service has said it will intensify compliance reviews of most classifications of employer-sponsored retirement plans.” – Nick Thornton at Benefits Pro

National Association of Realtors defends money launderers by effectively stating that “mandatory anti-money laundering controls imposed on other regulated entities make up for the absence of regulations covering real estate agents.” – Tom Weldy at The FCPA Blog

Middle office jobs have become even more stressful – Paul Clarke at eFinancial Careers

Jobs In Compliance

credit GDJ

Opinion: VW emissions scandal weighs on financial services 

I have not referred to the VW emissions scandal in Money Compliance. It is not a scandal in the financial services sector. But I should address the part that does affect financial service. Whenever money is involved, financial services are involved. In this case, all of the employees involved in deciding to trick emissions testing are, essentially, laundering money. After all, money laundering is legitimizing illegal gains, and gaining from evading the emissions regulations are illegal. Of course, the legal cases have not been prosecuted yet, so, I am not opining about the guilt or liability of any party. But let’s be clear about one think: banks are in a difficult position when corporate scandals are revealed. Do they immediately freeze assets? Whose assets? Are they opening themselves up to liability if they freeze assets because they are effectively judging their client? Are they opening themselves to liability if they don’t freeze assets because they are not protecting the public interest? The operational issues are dicey. Many developed jurisdictions have policies laid out for situations like this. I’m sure German does. But what if you work for a bank who has a branch in a jurisdiction without such directives and scandal breaks out in that jurisdiction? I find that banks are always shorted on credit for the difficult job they have simply because of the poor job they do on other areas. Banking services have a value to society. We should recognize that. And banks provide a way to make legitimate transactions and accumulation of wealth take place while deterring, preventing, and aiding investigations and prosecutions of illegitimate transactions and accumulations of wealth. As for the VW case, since it took decades of potential illegal activity, including breaking international treaties, the whole global financial sector is now involved in investigating the financial aspect of VW.


How do you like the new weekly round up?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Week In Compliance: Everybody’s a Terrorist!

You’re a Terrorist, and You’re a Terrorist, and You’re a Terrorist!State Department designates additional terrorist fighters. And there are many. Find it HERE.

Leniency Granted! – Consumer Financial Protection Bureau (CFPB) and Office of the Comptroller of the Currency (OCC) will be lenient in enforcement of TRID. TRID is TILA-RESPA Integrated Disclosure. TILA is Truth In Lending Act. RESPA is Real Estate Settlement Procedures Act of 1974. The examinations for compliance with TRID will primarily focus on “overall efforts” over itemized compliance. This language comes from identical letter from the CFPB and the OCC, which can be found HERE. – Nikki Smith, Federal Title & Escrow Company

Fraudster hound you for debts you never had! – These two companies and an additional person, Broadway Global Master Inc., In-Arabia Solutions Inc. and Kirit Patel, settled with the Federal Trade Commission for allegations of defrauding consumers to pay debts stemming from payday loans. This probably doesn’t affect you since you probably don’t get payday loans, but if you do, don’t work with these people. – Dodd-Frank Update

Millennials are optimistic for absolutely no reason! – “Millennials expressed the most optimism” despite living paycheck-to-paycheck. – ABA Banking Journal

“It is striking that most of the erosion in community banks’ share over the past decade has been concentrated among the very smallest loans.”  – Governor Lael Brainard at The Third Annual Community Banking Research and Policy Conference

Former CFO of Siemens Argentina pleaded guilty to conspiring to violate the anti-bribery, internal controls, and books and records provisions of the FCPA, and to commit wire fraud. – Richard Cassin, The FCPA Blog

Grant Thornton India and Grant Thornton Australia charged for breaking auditor independence. – SEC (HERE & HERE)

credit: Wikipedia

Bill Gates sues Petrobas, complaining of “pervasive bribery and money laundering scheme.” – Jonathan Stempel, Reuters

Jobs In Compliance

Opinion: Regulatory Creep, The New Kind 

No, regulatory creep isn’t someone stalking you. That’s when more and more regulations are imposed over time, usually as a result of disaster, and the regulations end up doing more harm than good. I am not anti-regulation, but there is a new type of regulatory creep going on. The new type of regulatory creep hasn’t so much to do with so many regulations but simply the complexity of them. I am a financial regulatory compliance expert and while the growth in the profession is good for me, this particular type of growth is bad for the economy and, therefore, bad for my profession on the long run. We are getting very close to making everything possibly illegal or subject to a prescriptive policy or procedure. A major part of this is the legal system we have, which I will address it by saying that we have letter-based laws rather than spirit-based laws. For example, rather than punishing a financial advisor for not seeking out for the best interest of his client before seeking out the best interest for himself (which is the standard for lawyers and accountants), we specifically allow them to be brokers AND dealers. The purpose was to reduce the cost of transactions. I won’t go into the economics of this, but economically it makes sense… for 1915, not 2015. The actual cost of financial transactions through our centralized counterparty system in our markets is less than a penny per transaction. As a matter of fact, the fraction is so small and continues to decrease that I cannot recall if it is in the 100th of a penny or 1,000th of a penny. This is the reason why online brokers can charge $4 per transaction. Add the broker’s cost, and the transaction still comes out to less than a $1, depending on the scale of the broker and the volume of business. The point is this: why do we treat financial advisors like employees first rather than professionals first. This will allow a whole sections of law to disappear. Look at the laws governing lawyers, as an example. Not much there. They are self-regulated and they can kick people out of the profession and they have a high bar of entry. It might be a little too high. We really need para-legal professionals, which, despite their claims, paralegals are not really paraprofessionals the way EMTs and Physician Assistants are in the medical profession. By shifting our laws to focus on the goals of regulated activities, we will develop a practice of prosecuting individuals and firms will reduce taking risk because they can’t shift the cost of noncompliance onto the shareholders, which is what is happening when firms pay for noncompliance rather than individuals. The shift will also make compliance much easier, as well as spotting noncompliance.


How do you like the new weekly round up?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Week In Compliance: Bankers believe that their employees do not want overtime pay

American Bankers Association reports that banks believe their overtime exempt employees do not want overtime pay, as stated by Christeena Naser, Vice President and Sr Counsel. This opinion stems from the Department of Labor’s new interpretation of the Primary Duty Test. “The term “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.” (DOL). ABA goes onto to state that the Test’s objective was to identify obvious non-exempt employees, but the new interpretation would seem to try to identify obvious exempt employees. The difference in nearly $27,000, or about 30 Million employees across all industries.

The Financial Crimes Enforcement Network (FinCEN) today announced a settlement with Desert Palace, Inc. d/b/a Caesars Palace where Caesars agreed to pay an $8 million civil money penalty for its willful and repeated violations of the Bank Secrecy Act. In addition, the casino agreed to conduct periodic external audits and independent testing of its anti-money laundering compliance program, report to FinCEN on mandated improvements, adopt a rigorous training regime, and engage in a “look-back” for suspicious transactions. – FinCEN

CFPB reported that it has handled 677,200 complaints nationally. – SubPrime Auto Finance News Staff

Big companies are some of the worst offenders in foreign corruption cases, but they are also increasingly policing themselves and self-reporting instances of bribery, new data show. The Organization for Economic Cooperation and Development analyzed 427 cases of foreign bribery in 17 countries to determine who’s bribing who, and how authorities are discovering corrupt practices. – Kathleen Caulderwood at International Business Times

FTC can sue companies for inadequate cyber-security protection, so says the United States Court of Appeals for the Third Circuit. – Dan Appleman at FCPA Blog

Caesar’s Palace to pay $8 Million penalty on poor compliance regime. FinCEN has also forced the Palace to take on additional action for boosting compliance an a lookback program to seek noncompliance in past transactions. “When it came to watching out for illicit activity, [Caesar’s Palace] allowed a blind spot in its compliance program,” says Jennifer Shasky, director at FinCEN.

“Whistle-blowers and insiders play an increasingly important role in our work,” says David Green, Director of the Serious Fraud Office in the UK. “I suggest… moving away from the identification principle of corporate criminal liability in English law and embracing something closer to vicarious liability, as in the USA,” he said in his speech at the 33rd Cambridge Economic Crime Symposium.

By performing an assessment of OFAC compliance programs and establishing a culture of compliance throughout the organization, a company can position itself to better understand and identify potential risk exposure. – Sven Stumbauer, Director in the Financial Crimes Compliance Practice at AlixPartners, LLP at International Banker

Jobs In Compliance

Opinion: FRB of Boston says Prepaid cards can be a savings tool, and I agree 

credit Danny Choo

Prepaid cards from credit card companies have grown significantly in the past decade. They offer credit transactions to those who do not have the credit history to have credit cards. They offer a way to build credit for those who cannot even open a bank account. These are people and families who make $25,000 or less. If you are reading this, you are very likely a person with a bank account and a credit card. You might not know, but there are people who do not qualify to have a bank account. I was once such a person. But I wasn’t the norm of such a person. I had graduated from college and I didn’t yet have a job. During college, I had a college student checking out. I was moving back home 2,000 miles away from my bank. So, I needed a local bank. Wells Fargo said that I had overdrafted too many times and I do not have a history of income that would otherwise let them overlooking this. I was shocked. I didn’t know that banks refused to open checking accounts. Even more astonishing, this was at a time when checking account were not free. I went down the street to Key Bank, who opened an account for me. I got a job and Key Bank had my business for many years. But most people who do not qualify for checking account aren’t in my position. They have never made enough money to have any savings at all, which means even if they had a checking account, it would sit empty. Even having an account for someone open a bank up to various risks, which all have a cost. But financial institutions have come up with a solution: Prepaid Card. This uses the credit network for transactions but at no time transactions beyond the amount in the card can be made. And banks do not have to offer any services, keeping all of the information on the card. Actually, in Eastern Africa, the same type of decentralized banking system is growing through cellphones. And if you think about it a little longer, Bitcoin and other cyber-currencies are just another decentralized payment system, albeit with more value involved. What Prepaid Cards offer is not merely a way to make transactions. It can be method to store value, as economists would put it. That is, a person can save money in such cards. The difference for the user is minimal for the most part. Sure, it is less secure because if you lose it, you’ve lost all of your money, just like cash. But it is safer than cash since it is possible to have an account on that card, even though it wouldn’t have any of the protections of a checking account. At least, there would be a remote way to stop transactions on that card, if lost, unlike cash. For the financial system, prepaid cards balances cannot be used to lend money. But banks are not starved for money right now. The Federal Reserve is offering money below the inflation rate, which means, banks are being paid to just hold money. The card balance does not flow through the system until it is used for a transaction, but it a clear benefit to the consumer who cannot afford to be connected to the financial system through depository banking. For banks, it allows them to have a credit history on those people should they eventually want to join the financial system. The banks also make money on the credit transaction. And for the system as a whole, it reduces risks involving money laundering, fraud, theft and cyber crimes.


How do you like the new weekly round up?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 

Bankers believe that their employees do not want overtime pay

Williams Sisters, unlikely to be affected by new Primary Duty Test Standards | credit Youtube

American Bankers Association reports that banks believe their overtime exempt employees do not want overtime pay. That’s not exactly what Christeena Naser, Vice President and Sr Counsel, said, but she might as well have in her comment letter. The Letter goes onto to state that the Primary Duty Test‘s objective was to identify obvious non-exempt employees, but the new interpretation would identify obvious exempt employees. The difference in nearly $27,000 per eligible employee, or about 6.3 Million employees.

“The term “primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.” (DOL).

The change in Standard would reach approximately 30 Million employees across all industries, 6.3 Million of which are in financial services. The previous Standard deferred to states because many state standards were more inclusive than that of the DOL. The new DOL standard is much higher. being raised from $23,660 per year to $50,440. One should know that while these figures are yearly, the Standard applies to overtime pay on a weekly basis.

“The salary standard would reduce the number of individuals eligible for the exemptions by 6.3 million salaried employees, ” ABA’s comment letter states. The implication is that banks would reduce hours of 6.3 Million employees to the lowest end of full-time status as much as possible in order to avoid paying overtime. It also implies that DOL have reason to believe that the guarantee in employment due to the salaried nature of a role is worth very little. Considering how little guarantee there is, the DOL is onto something there.

Just because a bank employee makes more than $50,440 per year without overtime pay does not mean that that employee cannot be on an hourly wage. DOL has moved the cap on all hourly wage employees from $100,000 to $122,148. This means hourly employees can qualify for overtime pay as long as the non-overtime pay is less than $122,148 per year. ABA objects to this as well.

All of these Standard change-levels are based on data from the Bureau of Labor Statistics.

ABA objects to the Standard not be adjusted for geography. This is quite valid. A community bank in rural Iowa will be hit harder than a community bank in New York City.

But the rest of the complaints, and they are truly complaints, read as veiled threats. There are a lot of justifications based on what will happen if these Standards are applied. All of them are dire. All of them do not bode well for employees. For that strategy to work, the bank would have to assume that its employees do not know what is good for them. The direness of the predictions imply that banks will be forced to hurt their employees by complying with the new DOL mandate.

If enumerating all the ways the ABA’s Comment Letter fails to make its point to someone who might have helped craft this new Standard at the DOL, the failure can be summed up thusly: ABA’s Comment Letter fails to convince the Department to stop the pursuit of the new Standards because it fails to address the issues that are important to employees as seen by the Department. At no time does the Letter acknowledge the good that the Department is trying to accomplish. So, when the Letter provides alternative solutions, it carefully avoids stating what the such solutions provide. By avoiding such valuation, the ABA avoids having their alternative compared to the Department’s solutions. And by avoiding the value of their solutions, the ABA makes their members seem unconcerned with the wellbeing of bank employees, and does not avoid to address how the new Standards are not as beneficial as they can be.

Overall, the letter is a carefully crafted legal argument wrapped in economic concerns. The DOL, I assume, are seriously concerned with economics and less so with legal intricacies.


I have read ABA’s Comment Letter for you so that you don’t have to. If you don’t like how I interpreted ABA’s Comment Letter on the new overtime exemption and HCE standards, comment below.


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE. 


Bibliography

Take Home Compliance

Whenever possible, Money Compliance has been trying to provide some job posts from LinkedIn in a post called Jobs in Compliance. As the blog transitions over from everyday to twice per week this fall, the Friday edition will be expanded. Jobs in Compliance will be a segment of the Friday post called Take Home Compliance. On Mondays or Tuesdays, there will be a post that will address specific compliance issues. If it hasn’t been clear, the transition of this blog will be from news (like JD Supra and FCPA Blog) and high level advice (like Michael Volkov and Richard Bistrong) to more nitty gritty. The idea is this: readers have multiple sources for news. “Experts” in the field who give advice and have exposure tend to focus on things that really aren’t very specific to compliance. Their advice could be about corporate culture in general. And while corporate culture is the best way to prevent running afoul of the law, there are lots of things that culture just cannot tackle that are really specific to the functions in the compliance department. This blog will try to provide that function specific information and advice. Also mentioned previously will be a greater effort to expand the resources page. Please look out for that in the future.

So, here’s the first entry of Take Home Compliance:

A cryptocurrency mining firm HashingSpace has filed with FinCEN as a MSB. The best known cryptocurrency is BitCoin. Money Service Business is a legal designation for non-bank financial transaction companies, not including credit cards. Western Union is the best known MSB. FinCEN is the abbreviation for Financial Crimes Enforcement Network, the division of the US Treasury that deals with the deterrence, prevention, and investigation of financial crimes outside of the capital markets. This is move to make BitCoin more accepted. BitCoin has taken a dive in the last year. A year ago it was valued above $500 per coin and now it is a little above $225, losing more than 50% of its value. The current problem with BitCoin is that it is being used as an investment rather than a vehicle for transactions. Nikhil Gupta at NewsBTC

DOJ has created a position for compliance counsel. The idea is to differentiate between effective compliance and paper compliance. Compliance with the law on a point by point basis by missing the purpose of the law is paper compliance. Common sense would lead one to believe that those in paper compliance will be prosecuted more harshly than those in effective compliance who may not meet the letter of the law because the whole point of compliance is to deter and prevent incompliance. Alison Tanchyk and Margaret Erin Rodgers at Daily Business Review

CFPB focuses on the little know Reverse Mortgages. A reverse mortgage is a unique type of loan for homeowners age 62 and older. This special type of loan is frequently insured by the Federal Housing Administration and allows homeowners to access the equity in their homes, without making monthly mortgage payments. Borrowers are not required to repay the reverse mortgage loan as long as they live in the home. However, the loan must be repaid when the last surviving borrower dies, moves out, or sells.” – Montoya M. Ho-Sang at Banking Exchange

Financial Regulator Compliance has become a boon for the people who might be working against the economy? That’s the perspective that is pushed in a Bloomberg article about JPMorgan has hired 8,000 people in compliance and controls. Supposedly even non-financial firms are hiring compliance officers to develop ethical policies to entice Millennials to join them. Even headhunters are focusing on compliance, some ditching other types of recruitment altogether. Anthony Effinger at BloombergBusiness

“Neither banks nor regulators emphasize regulatory excellence the way that they should.” That’s “why banks have trouble getting compliance right.” Kathryn L. Farrell at American Banker

From The Blog

Two compliance lessons from the Ashley Madison scandal: HERE and HERE.

Jobs in Compliance


What particular compliance requirement is making your life difficult these days?


Marcus Maltempo is a compliance professional with more than a decade of experience helping banks, law firms and clients manage investigations and regulatory responses. He is a member of ACAMS and ACFE.