GAO Issues Report on TARP Housing Programs

On January 11, the GAO announced the release of its report providing an update on the status and condition of Treasury’s TARP-funded housing programs as of October 31, 2016. According to the report, Treasury had disbursed nearly 60 percent or $22.6 billion of the $37.51 billion assigned to TARP for the purpose of helping struggling homeowners avoid foreclosure. The report also notes that the GAO’s latest review yielded no new recommendations and that only five of the 29 recommendations GAO has previously made related to the TARP-funded housing programs remain open or not fully implemented. The report states that the GAO will continue to monitor and assess the status of these recommendations.

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House Terror Financing Task Force Releases Results of Two-Year Investigation

On December 20, the House Financial Services Committee’s Task Force to Investigate Terrorism Financing announced the release of a report detailing the results of its two-year investigation into terror financing. The report, entitled Stopping Terror Finance: Securing the U.S. Financial Sector, is intended to “serve as a useful summary of the key points illuminated by Task Force hearings regarding the terrorist financing threat, the necessary components of an effective strategy to address such financing activity, and current efforts to combat it.

Among other things, the Task Force took a more granular look at some less well-publicized terrorist financing methodologies, including: (i) the use of trade-based money laundering; (ii) the use of individual and corporate charitable foundations; (iii) the plundering of arts and antiquities by terrorists, especially by Islamic State of Iraq and Syria (ISIS); and even (iv) drug trafficking.

Moreover, as explained by Task Force Chairman Mike Fitzpatrick (R-Penn), the task force “discovered highly critical vulnerabilities” for which it presented several recommendations and called for further Congressional attention. Among other things, the report highlighted a need for:

  • Better interagency coordination and resource allocation;
  • Better use of and access to information that can identify illicit finance;
  • Adding more overseas Treasury attachés;
  • Continued attention to helping developing countries fight illicit finance;
  • A greater domestic and international focus on stopping trade-based money laundering;
  • Development of a harmonized regulatory and examination procedure for nonbank financial institutions – primarily money service businesses (MSB) but also emerging value transfer technologies – to squeeze out illicit finance and provide banks the comfort necessary for them to again widely offer MSB retail account services;
  • Development of a whole-of-government strategy to combat terror finance and other forms of financial crimes; Beneficial ownership of corporate entities; and
  • Re-animation of the interagency Terrorist Financing Working Group.

Notably, members of the Task Force have already introduced several bipartisan bills aimed at addressing some of the concerns identified in the report, including:

  • H.R. 5594, the “National Strategy for Combatting Terrorists, Underground, and Other Illicit Financing Act,” which passed the House on July 11, 2016 by voice vote, and requires the President, acting through the Treasury Secretary, to develop and publish an annual whole-of-government strategy to combat money laundering and terrorist financing.
  • H.R. 5602, which passed the House on July 11, 2016 by a vote of 356-47, requiring more detailed information to be reported to the Treasury regarding certain types of transactions in a specific area for a limited amount of time.
  • H.R. 5607, the “Enhancing Treasury’s Anti-Terror Tools Act,” which passed the House on July 11, 2016 by a vote of 362-45, enhancing Treasury’s anti-illicit finance tools by addressing issues that came up repeatedly in Task Force Hearings.
  • H.R. 5603, the “Kleptocracy Asset Recovery Act,” which is sponsored by Ranking Member Stephen Lynch (D-MA), and seeks to establish a reward program aimed at helping the U.S. identify, freeze, and, if appropriate, repatriate assets linked to foreign government corruption, which is often an enabler of terrorism.
  • H.R. 5606, the “Anti-Terrorism Information Sharing Is Truth Act,” which is sponsored by Task Force Vice Chairman Pittenger (R-NC) and which seeks to refine “safe harbors” for the sharing of anti-terror information, reaffirming Congressional intent in existing statute to encourage government sharing of terror methodologies with banks to help them better recognize such activity.
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OFAC Sanctions Russian Individuals and Companies in Connection with Ukrainian Conflict

On December 20, Treasury’s Office of Foreign Asset Control (OFAC) announced its decision to sanction seven individuals and eight entities in connection with Russia’s occupation of Crimea and the conflict in Ukraine. OFAC also identified 26 subsidiaries of Russian banks as subject to sanctions already in place on their parent companies. Among other things, the sanctions prohibit U.S. residents, citizens, and financial institutions from participating in various financial dealings with the companies. As explained by John E. Smith, acting director of Treasury’s sanctions enforcement office, the sanctions were introduced “in response to Russia’s unlawful occupation of Crimea and continued aggression in Ukraine” in order to “maintain pressure on Russia by sustaining the costs of its occupation of Crimea and disrupting the activities of those who support the violence and instability in Ukraine.” Concurrent with today’s announcement, OFAC also issued a Russia/Ukraine-related General License 11, which authorizes certain transactions “necessary to requesting, contracting for, paying for, receiving, or utilizing a project design review or permit from FAU Glavgosekspertiza Rossii’s office(s) in the Russian Federation.”

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Treasury Sanctions North Korean Officials and Companies from Transportation, Mining, Energy, and Financial Services Industries

On December 2, OFAC announced its decision to designate 16 entities and seven individuals in response to North Korea’s ongoing nuclear weapons development and violations of U.N. security council resolutions. The designations include a number of North Korean banks and other entities in the financial services sector of the North Korean economy. As a result of today’s action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within the United States must be blocked. Additionally, U.S. persons are generally prohibited from engaging in transactions involving the designated persons and listed aircraft. The additions to the Specially Designated Nationals List were made pursuant to Executive Orders 13382, 13687, and 13722, which target proliferators of weapons of mass destruction, the Government of North Korea, and a number of North Korean trade and industry sectors, including transportation, coal and energy, and financial services.

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Treasury Announces its Latest Round of Federal Tax Credit Allocations to Community Development Entities

On November 17, Treasury announced that its Community Development Financial Institutions Fund (CDFI Fund) will provide a total of $7 billion in New Markets Tax Credit (NMTC) awards to over 120 organizations nationwide. The 120 organizations receiving awards were selected from a pool of 238 applicants that requested approximately $17.6 billion in allocation authority. This year’s award brings the total amount awarded through the NMTC Program to $50.5 billion.

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