FinCEN, Banking Agencies Release Guidance on Applying Customer Identification Program Requirements to Holders of Prepaid Cards

On March 21, the Federal Reserve, FDIC, NCUA, OCC, and FinCEN published guidance to issuing banks (i.e., banks that authorize the use of prepaid cards) intended to clarify the application of customer identification program (CIP) requirements to prepaid cards. The guidance clarifies that when the issuance of a prepaid card creates an “account” as defined in CIP regulations, CIP requirements apply. The guidance indicates that a prepaid card should be treated as an account if it has attributes of a typical deposit product, including prepaid cards that provide the ability to reload funds or provide access to credit or overdraft features. Once an account has been opened, CIP regulations require identification of the “customer.” The guidance explains that the cardholder should be treated as the customer, even if the cardholder is not the named accountholder, but has obtained the card from a third party program manager who uses a pooled account with the bank to issue prepaid cards. Finally, the guidance stresses that third party program managers should be treated as agents, not customers, and that “[t]he issuing bank should enter into well-constructed, enforceable contracts with third-party program managers that clearly define the expectations, duties, rights, and obligations of each party in a manner consistent with [the] guidance.”

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Agencies Finalize Diversity Policy Statement

On June 9, six federal agencies – the Federal Reserve, CFPB, FDIC, NCUA, OCC, and the SEC – issued a final interagency policy statement creating guidelines for assessing the diversity policies and practices of the entities they regulate. Mandated by Section 342 of the Dodd-Frank Act, the final policy statement requires the establishment of an Office of Minority and Women Inclusion at each of the agencies and includes standards for the agencies to assess an entity’s organizational commitment to diversity, workforce and employment practices, procurement and business practices, and practices to promote transparency of diversity and inclusion within the organization. The final interagency guidance incorporates over 200 comments received from financial institutions, industry trade groups, consumer advocates, and community leaders on the proposed standards issued in October 2013. The final policy statement will be effective upon publication in the Federal Register. The six agencies also are requesting public comment, due within 60 days following publication in the Federal Register, on the information collection aspects of the interagency guidance.

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Federal Banking Regulators Testify on “Regulatory Relief”

On February 10, officials from federal and state banking authorities – the Fed, FDIC, NCUA, OCC, and the CSBS – testified at a U.S. Senate Banking Committee on ways the agencies can provide “regulatory relief” to community banks and credit unions, which disproportionately incur burdens to implement the rules and provisions of the Dodd-Frank Act.  Specifically, officials from each of the federal banking agencies detailed current initiatives and proposals that would provide less burdensome compliance costs.

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NCUA Files Latest Suit Over Purchased RMBS

On December 23, the NCUA announced its latest suit against a major bank. Filed in the SDNY, the 122-page complaint alleges that the bank violated state and federal laws by failing to fulfill its duties as trustee to 27 RMBS trusts. The NCUA is suing the bank in its capacity as liquidating agent for five failed federal credit unions who purchased the RMBS. This latest suit comes less than a week when the NCUA filed a similar suit against another large global bank.

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NCUA Sues National Bank

On November 10, the NCUA announced the filing of a complaint against a large national bank for its alleged failure to fulfill its duties as a trustee for 121 residential mortgage-backed securities trusts. The NCUA claimed that the bank failed to comply with state and federal laws – Trust Indenture Act of 1939, and the Streit Act – establishing the trustee’s duties to trust beneficiaries. Specifically, NCUA accused the bank of not notifying corporate credit unions of defects in their mortgage loans, which prevented the repurchase, substitution, or cure of defective mortgage loans. NCUA further alleged that the bank’s lack of action contributed to the failure of the credit unions.

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