International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Friday, October 31, 2014

Risk-Based Approach for the Banking Sector

FATF logoThe risk-based approach is central to the effective implementation of the FATF Recommendations. A risk-based approach means that countries, competent authorities, and banks identify, assess, and understand the money laundering and terrorist financing risk to which they are exposed, and take the appropriate mitigation measures in accordance with the level of risk.

This flexibility allows for a more efficient use of resources, as banks, countries and competent authorities can decide on the most effective way to mitigate the money laundering / terrorist financing risks they have identified. It enables them to focus their resources and take enhanced measures in situations where the risks are higher, apply simplified measures where the risks are lower and exempt low risk activities. The implementation of the risk-based approach will avoid the consequences of inappropriate de-risking behaviour.

This guidance will help in the design and implementation of this approach for the banking sector, taking into account national risk assessments and the national legal and regulatory framework. It will help develop a common understanding of the risk-based approach between supervisory authorities and banks. The practical examples in this guidance will further assist in understanding the various elements of this approach.

This guidance consists of three sections.

  • Section I explains the key elements of the risk-based approach
  • Section II provides specific guidance for banking supervisors
  • Section III provides specific guidance for banks

Further reading:

October 31, 2014 | Permalink | Comments (0)

Thursday, October 30, 2014

Guidance on Transparency and Beneficial Ownership

FATF logoThis FATF Guidance will assist countries to design and implement measures that will deter and prevent the misuse of corporate vehicles, such as companies, trusts and other types of legal persons and arrangements – for money laundering, terrorist financing and other illicit purposes.

Corporate vehicles play an essential role in the global economy, conducting a wide range of legitimate commercial and entrepreneurial activities. However, they have also been misused by criminals to disguise and convert the proceeds of their crimes. The appeal to criminals lies in the fact that corporate vehicles can be misused to circumvent controls by disguising the identity of known or suspected criminals and the source of funds or assets. The misuse of corporate vehicles could be significantly reduced if accurate information regarding both the legal owner and the ultimate beneficial owner, the source of the corporate vehicle’s assets, and its activities were readily available to the authorities. It is often very difficult for competent authorities to identify the natural, real person who truly has ownership and control of a company, trust or other corporate vehicle, particularly when the arrangement involves several countries.  

Criminals make use of this lack of access to beneficial ownership information. By setting up one or more corporate vehicles, they are able to hide their identity, the true purpose of the account and the source or use of funds or property associated with the corporate vehicle.

The FATF Recommendations provide measures that address the transparency and beneficial ownership of legal persons (Recommendation 24) and legal arrangements (Recommendations 25). Countries should take measures to prevent the misuse of legal persons and arrangements from being misused for criminal purposes, including by:

  • Assessing the risks associated with legal persons and legal arrangements
  • Making legal persons and legal arrangements sufficiently transparent, and
  • Ensuring that accurate and up-to-date basic and beneficial ownership information is available to competent authorities in a timely fashion.

While the transparency and beneficial ownership requirements of the FATF Recommendations are aimed at fighting money laundering and the financing of terrorism, they also support efforts to prevent other serious crimes such as tax crimes and corruption. The FATF’s role as the standard setter on beneficial ownership was echoed in the actions taken by global leaders such as the G20 Leaders’ commitment to implement the FATF standards on beneficial ownership.  

Earlier mutual evaluation cycles showed that implementing the FATF requirements on transparency and beneficial ownership proved challenging for a number of countries. The FATF has therefore developed this guidance, with input from private sector and corruption experts, to assist policy makers and practitioners in national authorities to identify, design and implement appropriate measures to prevent the misuse of corporate vehicles.

More reading:

October 30, 2014 | Permalink | Comments (0)

New FATCA compliant 1099s released by IRS

Irs_logoThe IRS has posted new versions of the following Forms and Instructions to the Product Page:

TY2015 Form 1099-DIV
TY2015 Form 1099-INT
TY2015 Form 1099-OID
TY2015 Inst 1099-DIV
TY2015 Inst 1099-INT and 1099-OID

What's New
FATCA filing requirements of certain foreign financial institutions (FFIs). Beginning in 2014, an FFI with a chapter 4 requirement to report a U.S. account maintained by the FFI that is held by a specified U.S. person may satisfy this requirement by reporting on Form(s) 1099 under the election described in Regulations section 1.1471-4(d)(5)(i)(A). Additionally, a U.S. payor may satisfy its chapter 4 requirement to report such a U.S. account by reporting on Form(s) 1099. See Regulations section 1.1471-4(d)(2)(iii)(A). Form 1099-DIV is among the Forms 1099 used for such purpose. A new check box was added to Form 1099-DIV to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.

FATCA Filing Requirement Check Box

Check the box if you are a U.S. payor that is reporting on Form(s) 1099 (including reporting distributions in boxes 1 through 3 and 8 through 11 on this Form 1099-DIV) as part of satisfying your requirement to report with respect to a U.S. account for chapter 4 purposes as described in Regulations section 1.1471-4(d)(2)(iii)(A). In addition, check the box if you are an FFI reporting payments to a U.S. account pursuant to an election described in Regulations section 1.1471-4(d)(5)

2nd TIN Notice
You may enter an “X” in this box if you were notified by the IRS twice within 3 calendar years that the payee provided an incorrect taxpayer identification number (TIN). If you mark this box, the IRS will not send you any further notices about this account.

Reporting bond premium on tax-exempt bonds.

Box 13 was added to Form 1099-INT to report bond premium on tax-exempt bonds. All later boxes were renumbered.

FATCA filing requirements of certain foreign financial institutions (FFIs).

Beginning in 2014, an FFI with a chapter 4 requirement to report a U.S. account maintained by the FFI that is held by a specified U.S. person may satisfy this requirement by reporting on Form(s) 1099 under the election described in Regulations section 1.1471-4(d)(5)(i)(A). Additionally, a U.S. payor may satisfy its chapter 4 requirement to report such a U.S. account by reporting on Form(s) 1099. See Regulations section 1.1471-4(d)(2)(iii)(A). Forms 1099-INT and 1099-OID are among the Forms 1099 used for such purpose. New check boxes were added to Forms 1099-INT and 1099-OID to identify an FFI filing this form to satisfy its chapter 4 reporting requirement.

October 30, 2014 | Permalink | Comments (0)

Wednesday, October 29, 2014

Major new steps to boost international cooperation against tax evasion: Governments commit to implement automatic exchange of information beginning 2017

The new OECD/G20 standard on automatic exchange of information was endorsed today by all OECD and G20 countries as well as major financial centres participating in the  annual  meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes in Berlin. A status report on committed and not committed jurisdictions  will be presented to G20 leaders during their annual summit in Brisbane, Australia on November 15-16.

Fifty-one jurisdictions, many represented at Ministerial level, translated their commitments into action during a massive signing of a Multilateral Competent Authority Agreement that will activate automatic exchange of information, based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Early adopters who signed the agreement have pledged to work towards launching their first information exchanges by September 2017. Others are expected to follow in 2018.

 The new Standard for Automatic Exchange of Financial Account Information in Tax Matters was recently presented by the OECD to the G20 Finance Ministers during a meeting in Cairns last September. It provides for exchange of all financial information on an annual basis, automatically. Most jurisdictions have committed to implementing this Standard on a reciprocal basis with all interested jurisdictions.

Logooecd_enThe OECD today released the full version of a new global standard for the exchange of information between jurisdictions.  

CRS Due Diligence Standards similar but not identical to FATCA

The CRS contains a reporting and a due diligence standard that underpins the automatic exchange of information, very similar to FATCA.

Due diligence distinguishes between pre-existing accounts and new accounts, individual accounts and entity accounts.

Individual Accounts

Pre-existing accounts do not have a de minimis amount but are divided between low value and high value accounts. 

Low Value

Low value accounts have a permanent residency based test based on documentation or, failing that, based upon indicia.  If indicia are found, then either the account holder must provide self-certification or the account must be reported to all jurisdictions to which the indicia attach.

High Value

High value accounts are defined as having an aggregate balance or value of $1 million US dollars by December 31 of a calendar year. High value accounts require a paper based search as well as the test of actual knowledge of the relationship manager.

New Accounts

All new individual accounts (no de minimis) require self-certification, with confirmation of its reasonableness, which can be performed at the time of account onboarding.

Entity Accounts

Preexisting entity accounts

Preexisting entity accounts firstly need to determine if the entity is a reportable person, generally using available AML/KYC information, and if such information is not available, then a self certification will be required from the entity.  

However, a preexisting entity account de minimis size of US$250,000 is available at the option of the jurisdiction adopting the CRS. 

Passive entity

If the entity is a passive entity then the residency of the controlling members of the entity must be determined.  Passive entity status may be determined by self-certification unless the financial institution has contra-indication information, or information is otherwise publicly available to refute the self-certification.  Controlling members of the entity may be determined based upon the AML/KYC information available.  Control must be interpreted in a manner consistent with the FATF standard.

New entity accounts

For new accounts, the de minimis option is not available because self-certification is easily obtainable at account opening. 


The Standard for Automatic Exchange of Financial Account Information in Tax Matters calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis. The Standard, developed at the OECD under a mandate from the G20, endorsed by G20 Finance Ministers in February 2014, and approved by the OECD Council. 


Common Reporting and Due Diligence Standards (“CRS”)

February 13 the OECD released the Standard for Automatic Exchange of Financial Account Information Common Reporting Standard.  

The CRS calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. Part I of the report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

What are the main differences between the CRS (“GATCA”) and FATCA?

The CRS is also informally called “GATCA”, referring to the “globalization” of FATCA.

The CRS consists of a fully reciprocal automatic exchange system from which US specificities have been removed. For instance, it is based on residence and unlike FATCA does not refer to citizenship. Terms, concepts and approaches have been standardized allowing countries to use the system without having to negotiate individual Annexes.

Unlike FATCA the CRS does not provide for thresholds for pre-existing individual accounts, but it includes a residence address test building on the EU savings directive. The CRS also provides for a simplified indicia search for such accounts. Finally, it has special rules dealing with certain investment entities where they are based in jurisdictions that do not participate in the automatic exchange under the standard.

Single Global Standard for Automatic Exchange (“GATCA”)

Under GATCA jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. Part I of this report gives an overview of the standard. Part II contains the text of the Model Competent Authority Agreement (CAA) and the Common Reporting and Due Diligence Standards (CRS) that together make up the standard.

The Report sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.

To prevent taxpayers from circumventing the CRS it is specifically designed with a broad scope across three dimensions:

  1. The financial information to be reported with respect to reportable accounts includes all types of investment income (including interest, dividends, income from certain insurance contracts and other similar types of income) but also account balances and sales proceeds from financial assets.
  2. The financial institutions that are required to report under the CRS do not only include banks and custodians but also other financial institutions such as brokers, certain collective investment vehicles and certain insurance companies.
  3. Reportable accounts include accounts held by individuals and entities (which includes trusts and foundations), and the standard includes a requirement to look through passive entities to report on the individuals that ultimately control these entities.

The OECD's CRS describes the due diligence procedures that must be followed by financial institutions to identify reportable accounts.

Reporting Schema and Protocols

The CRS Schema Information sections are:

I Message Header with the sender, recipient, message type, reporting period 
II Controlling Person or Account Holder details if an individual 
III Account Holder if an entity 
IV CRS Body; Reporting FI and Reporting Group; and Account details

The OECD address the challenge of transliteration when sending and receiving jurisdictions do not use a common alphabet.  The Competent Authorities are to agree how they will undertake such transliteration.  If there is no such agreement, then the sending jurisdiction should transliterate from its domestic alphabet or literation to a Latin alphabet aligned with international standards for transliteration (for example as specified in ISO 8859).

Financial Institution ID Number?

The CRS does not require one identifier, such as the US FATCA GIIN, be employed by all jurisdictions.  Rather, it establishes several possible identifying numbers, including: a TIN, business/company registration code/number, Global Legal Entity Identifier (LEI), or Global Intermediary Identification Number (GIIN).

If CRS and IGAs are Universally Adopted, Then Why is the Multilateral Convention on Mutual Administrative Assistance in Tax Matters Still Necessary?

Both the CRS model, which is currently being developed by the OECD with G20 countries, and the IGAs are based on the automatic exchange of information from the tax administration of one country to the tax administration of the residence country.  As with other forms of exchange of information, a legal basis is needed to carry out automatic exchange. While bilateral treaties such as those based on Article 26 of the OECD Model Tax Convention would permit such exchanges, it may be more efficient to implement a single global standard through a multilateral instrument.  

Global Forum Peer Reviews and Monitoring Of Automatic Exchange

G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard.  More than 60 countries and jurisdictions of the 121 Global Forum members have now committed to early adoption of the standard, and additional members are expected to join this group in the coming months. See the link for Country Peer Reviews and the Global Forum list of ratings chart.

Practical Compliance Aspects of FATCA and GATCA

Over 600 pages of in-depth analysis of the practical compliance aspects of financial service business providing for exchange of information of information about foreign residents with their national competent authority or with the IRS (FATCA), see Lexis Guide to FATCA Compliance

October 29, 2014 | Permalink | Comments (0)

Massachusetts Man Sentenced to Four Years in Prison for Computer Hacking Involving Stolen Credit Card Numbers and Altered Academic Records

A Massachusetts man was sentenced to serve four years in prison today for hacking into computer networks around the country – including networks belonging to law enforcement agencies and a local college – to obtain highly sensitive law enforcement data and to alter academic records, as well as for possessing stolen credit and debit card numbers.  

Cameron Lacroix, 25, of New Bedford, Massachusetts, pleaded guilty on June 25, 2014, to two counts of computer intrusion and one count of access device fraud.  Lacroix admitted that, between May 2011 and May 2013, he obtained and possessed payment card data for more than 14,000 unique account holders.  For some of these account holders, Lacroix also obtained other personally identifiable information.

Additionally, from August 2012 through November 2012, Lacroix repeatedly hacked into law enforcement computer servers containing sensitive information including police reports, intelligence reports, arrest warrants, and sex offender information.  In one such instance, in September 2012, Lacroix hacked into a computer server operated by a local Massachusetts police department and accessed an e-mail account belonging to the chief of police. 

Lacroix, who was a student at Bristol Community College (BCC), also admitted that between September 2012 and November 2013, he repeatedly hacked into BCC’s computer servers and used stolen log-in credentials belonging to three instructors to change grades for himself and two other students. 

October 29, 2014 | Permalink | Comments (0)

Tuesday, October 28, 2014

FinCEN Issues Two Administrative Rulings Regarding Virtual Currency

FINCENThe Financial Crimes Enforcement Network (FinCEN) today issued two administrative rulings regarding virtual currency. One ruling addresses the application of FinCEN regulations to a virtual currency trading platform (FIN-2014-R011), and the other addresses the application of FinCEN regulations to a virtual currency payment system (FIN-2014-R012). 



Specifically, you ask whether the convertible virtual currency trading and booking platform that the Company intends to set up (the “Platform”) would make the Company a money transmitter under the BSA. Based on the following analysis of the description of the Platform as presented in your letter, FinCEN finds that the Company would be a money transmitter pursuant to our regulations.



Specifically, you ask whether the convertible virtual currency payment system the Company intends to set up (the “System”) would make the Company a money transmitter under the BSA. Based on the following analysis of the description of the System to provide payments to merchants who wish to receive customer payments in Bitcoin, FinCEN finds that, if the Company sets up the System, the Company would be a money transmitter and should comply with all risk management, risk mitigation, recordkeeping, reporting, and transaction monitoring requirements corresponding to such status.


October 28, 2014 in FinCEN | Permalink | Comments (0)

Monday, October 27, 2014

Ocwen Financial, one of the country’s largest mortgage servicers, backdated “hundreds of thousands” of letters offering home-loan modifications

The New York Post reports that: 

One of the country’s largest mortgage servicers backdated “hundreds of thousands” of letters offering home-loan modifications — thus robbing imperiled homeowners of a chance to rework their troubled mortgages, New York’s banking regulator said Tuesday.

Read the article here.

October 27, 2014 | Permalink | Comments (0)

Sunday, October 26, 2014

FATF clarifies risk-based approach: case-by-case, not wholesale de-risking

The FATF Plenary discussed the issue of de-risking on 22 October.

FATF logoGenerally speaking, de-risking refers to the phenomenon of financial institutions terminating or restricting business relationships with clients or categories of clients to avoid, rather than manage, risk in line with the FATF’s risk-based approach.  De-risking can be the result of various drivers, such as concerns about profitability, prudential requirements, anxiety after the global financial crisis, and reputational risk.  It is a misconception to characterise de-risking exclusively as an anti-money laundering issue.

This issue is of crucial importance to the FATF for two main reasons:

  1. De-risking can introduce risk and opacity into the global financial system, as the termination of account relationships has the potential to force entities, and persons into less regulated or unregulated channels. Moving funds through regulated, traceable channels facilitates the implementation of anti-money laundering / countering the financing of terrorism (AML/CFT) measures.
  2. It is central to our mandate to ensure that the global AML/CFT standard is well understood and accurately implemented, and that countries and their financial institutions are provided with support in designing AML/CFT measures that meet the goal of financial inclusion.

Recent supervisory and enforcement actions have raised the consciousness of banks and their boards about these issues. However, it is important to put into context that these were extremely egregious cases involving banks who deliberately broke the law, in some cases for more than a decade, and had significant fundamental AML/CFT failings.

“De-risking” should never be an excuse for a bank to avoid implementing a risk-based approach, in line with the FATF standards. The FATF Recommendations only require financial institutions to terminate customer relationships, on a case-by-case basis, where the money laundering and terrorist financing risks cannot be mitigated. This is fully in line with AML/CFT objectives. What is not in line with the FATF standards is the wholesale cutting loose of entire classes of customer, without taking into account, seriously and comprehensively, their level of risk or risk mitigation measures for individual customers within a particular sector.

The risk-based approach should be the cornerstone of an effective AML/CFT system, and is essential to properly managing risks. The FATF expects financial institutions to identify, assess and understand their money laundering and terrorist financing risks and take commensurate measures in order to mitigate them. This does not imply a “zero failure” approach.

The FATF is committed to financial inclusion, and effective implementation of AML/CFT measures through proper implementation of the risk-based approach.

Given the importance of this issue, and in light of these discussions the FATF has agreed:

  • To gather further evidence and analysis on the drivers and scale of de-risking. The FATF’s country assessments will be critically important in this regard, not least for FATF to reinforce its expectations on risk understanding and management. The FATF will also make full use of the work being conducted in other relevant international groups and forums, including the G20 Global Partnership for Financial Inclusion, the IMF, the World Bank Group, and the Basel Committee on Banking Supervision.
  • To continue to disseminate its various reports on risks, methods and trends allowing service providers to better understand money laundering and terrorist financing risks related to specific categories of customers and devise effective risk-based approaches.
  • To continue a number of existing activities and projects providing information and guidance to inform risk-based decision-making, including work on the risk-based approach for banks, the risk-based approach for money or value transfer services, best practices on combating the abuse of non-profit organisations, effective supervision and enforcement.
  • To stay abreast of developments in this area and to continue to interact with all actors relevant to this topic including the sectors most affected, regulators, supervisors, and banks.
  • To consider, on the basis of the evidence on the drivers and scale of de-risking, whether further work is necessary on specific issues. The FATF’s Policy and Development Group will determine this during the February 2015 FATF Plenary. 

The FATF is adopting at this Plenary Risk-based Approach Guidance for the Banking Sector which gives clear guidance on how to properly implement the risk-based approach, and is explicitly meant to be read in conjunction with the FATF Guidance on AML/CFT and Financial Inclusion. Banks who implement the risk-based approach, in line with the guidance given in these two papers, will be well-placed to avoid the consequences of inappropriate de-risking behaviour.

More reading:

October 26, 2014 | Permalink | Comments (0)

Saturday, October 25, 2014

Outcomes of the FATF meeting of 22-24 October 2014

FATF logoUnder the Australian Presidency, the first FATF Plenary meeting of Plenary year FATF-XXVI was held on 22-24 October 2014. 

The main issues dealt with by this Plenary were:   

  • Receiving an update on FATF’s membership expansion.
  • Hearing a briefing by the Chair of the Egmont Group on recent developments in financial intelligence units and welcoming a closer co-operation with the Egmont Group.

October 25, 2014 | Permalink | Comments (0)

Friday, October 24, 2014

Heads of Tax Administration agree global tax actions

OECD_globe_10cm_HD_4cThe OECD/G20 Base Erosion and Profit Shifting (BEPS) Project and the move to automatic exchange of financial account information took centre stage when Heads of Tax Administration met on 23-24 October in Dublin, Ireland.  The FTA is the leading international body concerned with tax administration, bringing together the heads of tax administrations from the OECD, members of the G20 and large emerging economies.

More than forty delegations participated in the Ninth Meeting of the OECD Forum on Tax Administration (FTA) and agreed that ever greater co-operation will be necessary to implement the results of the BEPS project and automatic exchange of information.

Specifically they agreed:

  • A strategy for systematic and enhanced co-operation between tax administrations;

  • To invest the resources needed to implement the new standard on automatic exchange of information; and

  • To improve the practical operation of the mutual agreement process.

The communiqué released at the close of the meeting contains more details and contains links to the following publications that have just been released by the FTA:

October 24, 2014 | Permalink | Comments (0)

FATF Summary of Outcomes from the Experts’ Meeting on Corruption

FATF logoThe Financial Action Task Force (FATF) and the G20 Anti-Corruption Working Group (ACWG) held a joint Experts’ Meeting on Corruption on Saturday, 18 October 2014.  In this meeting, 163 delegates from 28 jurisdictions and 19 organisations participated. This is the fourth time that the FATF and G20 ACWG have held such an event, which brings together anti-money laundering/counter-terrorist financing (AML/CFT) experts and anti-corruption experts to discuss issues of common interest.

The meeting was chaired by the FATF President, Mr. Roger Wilkins AO (Australia), at the OECD headquarters in Paris. The G20 ACWG Co-Chairs – Mr. Stefano Mogini (Italy) and Mr. Kieran Butler (Australia) (acting Co-Chair) – participated and reiterated the G20 support for FATF work to enhance transparency and combat corruption, and encouraged continued engagement on these issues.

The key objectives for this meeting were:

  • to discuss the FATF’s draft Guidance on Transparency and Beneficial Ownership, and incorporate feedback from anti-corruption experts to enhance the paper, and
  • to build on the previous discussions between the FATF and the G20 on anti-corruption issues, with a particular focus on measures to combat the misuse of corporate vehicles.


Corporate vehicles, such as companies and trusts, play an integral role in the global economy.
However, under certain conditions, they have been misused for criminal purposes including money
laundering and corruption.  Taking action to prevent the misuse of corporate vehicles is essential to
ensure the integrity of the international financial system, and support economic growth and

The FATF has set international standards which require countries to implement measures to
ensure that accurate information on the beneficial ownership of legal persons and legal
arrangements is available to competent authorities in a timely fashion.

Summary of outcomes of the meeting:

October 24, 2014 | Permalink | Comments (0)

Thursday, October 23, 2014

Six Federal Agencies Jointly Approve Final Risk Retention Rule for Securitization Transactions

800px-FdicLogoSix federal agencies approved a final rule requiring sponsors of securitization transactions to retain risk in those transactions. The final rule implements the risk retention requirements in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The final rule is being issued jointly by the Board of Governors of the Federal Reserve System, the Department of Housing and Urban Development, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission. As provided under the Dodd-Frank Act, the Secretary of the Treasury, as Chairperson of the Financial Stability Oversight Council, played a coordinating role in the joint agency rulemaking.

The final rule largely retains the risk retention framework contained in the proposal issued by the agencies in August 2013 and generally requires sponsors of to retain not less than five percent of the credit risk of the assets collateralizing the ABS issuance. The rule also sets forth prohibitions on transferring or hedging the credit risk that the sponsor is required to retain.

As required by the Dodd-Frank Act, the final rule defines a "qualified residential mortgage" (QRM) and exempts securitizations of QRMs from the risk retention requirement. The final rule aligns the QRM definition with that of a qualified mortgage as defined by the Consumer Financial Protection Bureau. The final rule also requires the agencies to review the definition of QRM no later than four years after the effective date of the rule with respect to the securitization of residential mortgages and every five years thereafter, and allows each agency to request a review of the definition at any time. The final rule also does not require any retention for securitizations of commercial loans, commercial mortgages, or automobile loans if they meet specific standards for high quality underwriting.

The final rule will be effective one year after publication in the Federal Register for residential mortgage-backed securitizations and two years after publication for all other securitization types.

October 23, 2014 | Permalink | Comments (0)

FinCEN Issues Quarterly Update of SAR Stats



The Financial Crimes Enforcement Network (FinCEN) yesterday issued the SAR Stats quarterly update, which provides information on Suspicious Activity Reports (SARs) filed through Sept. 30, 2014. 


Quarterly Update (October 2014)


October 23, 2014 | Permalink | Comments (0)

Wednesday, October 22, 2014

SEC Brought ‘Record’ 755 Enforcement Actions in 2014

The Securities and Exchange Commission filed a “record” 755 enforcement actions and obtained orders totaling $4.16 billion in disgorgement and penalties in fiscal 2014, according to preliminary figures released by the agency on Thursday.

read on at ThinkAdvisor

October 22, 2014 | Permalink | Comments (0)

Tuesday, October 21, 2014

EU fines JPMorgan, UBS, Credit Suisse for taking part in cartels

(Reuters) - JPMorgan, UBS and Credit Suisse were fined a total of 94 million euros ($120 million) by the European Commission for taking part in cartels in the financial sector. ... read on at Reuters

October 21, 2014 | Permalink | Comments (0)

A Ten Thousand Dollar Raise for Everyone at Wells Fargo?

Although we think of banking and Wall Street as a bastion of capitalism, sometimes an “occupy wall street” type person sneaks into the club.

An employee of Wells Fargo, Mr. Tyrel Oates, apparently tried an impressive subversive tactic to fight for a little socialism in the financial industry. ... read Jack Kelly's full article at CompliancEx

October 21, 2014 | Permalink | Comments (0)

Sunday, October 19, 2014

SEC Announces Enforcement Action Against Former Wells Fargo Advisors Compliance Officer for Altering Document

The Securities and Exchange Commission announced an enforcement action against a former Wells Fargo Advisors compliance officer who allegedly altered a document before it was provided to the SEC during an investigation.

According to the SEC’s order instituting an administrative proceeding against Judy K. Wolf, she was responsible for identifying potentially suspicious trading by Wells Fargo personnel or the firm’s customers and clients and then analyzing whether the trades may have been based on material nonpublic information.  Wolf created a document in September 2010 to summarize her review of a particular Wells Fargo broker’s trading, and she closed her review with no findings.  The SEC Enforcement Division alleges that Wolf altered that document in December 2012 afterthe SEC charged the broker with insider trading.  By altering the document, Wolf made it appear that she performed a more thorough review in 2010 than she actually had.  After Wells Fargo provided the document to the SEC as part of its continuing investigation, SEC enforcement staff spotted the alteration and questioned Wolf specifically about the document.  At first she unequivocally denied altering the document after September 2010, but in later testimony she testified that she had done so.

The SEC previously charged Wells Fargo in the case, and the firm agreed to pay $5 million to settle these and other violations of the securities laws.  Prior to the enforcement action, Wells Fargo placed Wolf on administrative leave and ultimately terminated her employment.

 “We allege that Wolf intentionally altered a trading review document after she knew that the SEC had charged a Wells Fargo employee with insider trading based on facts related to her review,” said Daniel M. Hawke, Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Regardless of her motivation, her conduct was inconsistent with what the SEC expects of compliance professionals and what the law requires.”

October 19, 2014 | Permalink | Comments (0)

Saturday, October 18, 2014

weekend reading

IMF_Text_LogoA Mirage, Not An Oasis: Easy Money and Financial Markets

Low interest rates and other central bank policies in the United States have sent investors looking for higher returns on their investments. Money is pouring into mutual funds and exchange-traded funds, which is fueling a mispricing of credit and a build-up of risks to liquidity in the markets—the ability to trade in assets of any size, at any time, and to find a ready buyer.Mutual funds and exchange-trade funds are the largest owners of U.S. corporate and foreign bonds (Chart 1). This means they provide a lot of credit to grease the wheels of the financial system because they have taken investors’ money and lent it to corporates. ...

SSRNBackstop Ambiguity: A Proposal for Balancing Specificity and Ambiguity in Financial Regulation, Julian J.Z. Polaris, Yale Law School

Many in the financial sector argue that the Security and Exchange Commission’s (SEC’s) rules are too vague, and have called for greater specificity and predictability. Specific rules serve important functions of notice and efficiency, but this Note argues that the rules in any given area of financial regulation should be paired with purposely vague “backstop ambiguity” provisions. Such a model would allow regulators to target unforeseen harmful behavior, as well as efforts to evade the law by exploiting loopholes. The Note uses the examples of insider trading and tender offers to assess the efficacy and shortcomings of real-world backstop ambiguity, eliciting lessons to construct a normative model for balancing specificity and ambiguity in regulatory design. At a time when the financial industry seems unconcerned with cultivating a reputation for ethical conduct, backstop ambiguity may have a role to play in promoting a culture of compliance.

October 18, 2014 | Permalink | Comments (0)

Friday, October 17, 2014

Scottie Pippen To Testify Against Financial Advisor

ImagesAccording to the Chicago Tribune, "Pippen is scheduled to testify for the prosecution Friday at the Dirksen U.S. Courthouse in the trial of his former financial adviser, Robert Lunn, on federal bank fraud charges, prosecutors say."

"A decade ago, Pippen won an $11.8 million judgment against Lunn after alleging the adviser made dubious investments, including real estate purchases and an airplane deal, according to court records.

In 2012, Lunn was criminally charged with fraudulently obtaining a $1.3 million business loan from Oak Brook-based Leaders Bank as well as separate loans of a combined $1.9 million. Lunn misrepresented to Leaders Bank the purpose of the loans as well as the nature of his investment portfolio, the charges alleged."


October 17, 2014 | Permalink | Comments (0)

IRS Blesses 401(k) Rollovers With Pre-, After-Tax Contributions

New IRS rulings have cleared the way for high-income clients looking to maximize the value of their employer-sponsored retirement plan assets.

The new rules change the way that after-tax retirement plan assets are treated upon distribution, providing flexibility and certainty for clients whose accounts contain both pre-tax and after-tax contributions. By allowing pre-tax and after-tax contributions to be distributed to the most appropriate retirement income planning vehicles with ease, the rules remove the complexities that previously discouraged clients seeking to maximize the value of these contributions, and eliminate the tax liability that accompanied a split distribution in the process.

read about it on ThinkAdvisor

October 17, 2014 | Permalink | Comments (0)