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Inside Washington (12/16/2011)

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  • WASHINGTON (12/19/11)--The Financial Crimes Enforcement Network (FinCEN) will launch a new Money Service Business (MSB) Registration website the week of Jan. 23, to improve the availability of MSB registration information. The site will replace the current MSB Registration List. As part of the Department of Treasury's initiative to go paperless, FinCEN will no longer send acknowledgement letters to MSBs. As part of the conversion to the new site and other FinCEN Bank Secrecy Act information technology modernization efforts, MSBs will not be able to confirm their registration status between Dec. 16  and Jan. 23. During the data transition period, MSBs will not receive acknowledgement letters and cannot request confirmation of their registration status through either FinCEN's Regulatory Helpline or the Internal Revenue Service's Enterprise Computing Center-Detroit Hotline. The latest version of the MSB Registration List will be available for general reference during this period …
  • WASHINGTON (12/19/11)--The Securities and Exchange Commission (SEC) is expected to appeal a U.S. District judge's rejection of a proposed $285 million settlement between the SEC and Citigroup Inc., according to The Wall Street Journal (Dec. 16). U.S. District Court Judge Jed S. Rakoff rebuked the SEC for charging Citigroup with negligence instead of fraud as part of a $285 million proposed settlement that said Citigroup misled investors about an investment tied to the deteriorating housing market in 2007 (News Now Nov. 29).  The SEC could appeal the Nov. 28 ruling to the Second Circuit Court of Appeals. The SEC's five-person commission is expected to vote on a recommendation about an appeal from the agency's enforcement staff soon …

CFPB provides outlet for financial crime informants

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WASHINGTON (12/19/11)--Individuals with information on potential violations of federal consumer financial laws will now have "a direct line of communication" to the Consumer Financial Protection Bureau (CFPB), CFPB Assistant Director of Enforcement and nominee for CFPB Director Richard Cordray said last week.

"Their tips will help inform [CFPB] strategy, investigations, and enforcement" and will help fulfill that agency's "commitment to consumers," Cordray said. Credit Union National Associatio (CUNA)  Deputy General Counsel Mary Dunn said CUNA "wants to make sure that the whistleblower process focuses on legitimate concerns involving illegal practices rather than facilitating frivolous inquiries or misguided 'tips.'"

Potential whistleblowers may contact the CFPB by emailing whistleblower@cfpb.gov or calling a toll free hotline at 855-695-7974. The CFPB said it also plans to add an online whistleblower application to its homepage soon.

Individuals that reach out to the CFPB may request confidentiality or ask to remain anonymous, but the CFPB said providing personal contact information may help the CFPB investigate and remediate the reported issues.

The CFPB will accept financial crime tips from current or former employees, contractors, vendors, and competitor companies, the release said. The agency said that portions of the Dodd-Frank Wall Street Reform Act would protect whistleblowers from any retaliation by potential violators they are reporting. Whistleblowers that believe they have been retaliated against may file complaints with the Secretary of Labor, the CFPB said.

The whistleblower program will be separate from the CFPB's consumer complaint activities, the agency added.

NCUA bans former FCU employee for abetting fraud

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ALEXANDRIA, Va. (12/19/11)--The National Credit Union Administration (NCUA) last week blocked former N&W Poca Division FCU employee Pamela Mullins from participating in the affairs of any federally insured financial institution.

Mullins has been sentenced to serve a 30-month prison sentence and three years of supervised probation following her conviction on charges of aiding and abetting bank fraud. Mullins also is required to pay $2,406,804 in restitution.

The Bluefield, W. Va.-based credit union was put into liquidation by the NCUA in 2008 after the NCUA determined it was insolvent and had no prospects of restoring viable operations. The credit union held $6 million in assets and had 1,194 members when it closed.

Violation of a prohibition order is a felony offense punishable by imprisonment and a fine of up to $1 million. Use the resource link to access all NCUA prohibition orders.

NFIP CLF other CU issues addressed by spending bill

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WASHINGTON (12/19/11)--The National Flood Insurance Program (NFIP) has been extended until May 31 after the U.S. Congress approved a $1 trillion omnibus federal government funding bill late last week, and several other credit union priorities will also be impacted by this bill.

The NFIP was set to expire on Dec. 16. That program has been funded by short-term resolutions for months, as both Democrats and Republicans, including Senate Banking Committee Chairman Tim Johnson (D-S.D.) and ranking minority member Richard Shelby (R-Ala.), have called for the program to be reformed.

Legislation that would extend the NFIP until September of 2016 also remains active in Congress.

The NFIP is important to credit unions because the mortgages they write for properties in a floodplain are required to have flood insurance. Credit Union National Association (CUNA) Senior Vice President of Legislative Affairs Ryan Donovan said CUNA backs the short term extension, but added it is "important that Congress consider a long term extension of this program to provide stability and predictability."

Other credit union priorities that are addressed by the omnibus bill include the National Credit Union Administration's (NCUA) Central Liquidity Facility (CLF), the NCUA's Community Development Revolving Loan Fund (CDRLF), the U.S. Treasury Department's Community Development Financial Institution (CDFI) Fund, and the Cooperative Development Program (CDP).

The CLF's current lending authority, which stands at up to 12 times of its paid-in capital, will remain at this level in 2012 under the terms of the omnibus bill. Funding for the CDRLF, which provides loans and technical assistance to federal and state credit unions that are designated as a low-income credit union, as defined by NCUA regulations, would drop slightly to $1.25 million. Funding for the CDFI Fund would also be reduced.

Funding for the CDP has not been determined, but the 2012 budget for the U.S. Agency for International Development will be cut by 13% under the omnibus bill. However, the omnibus bill directs $10 million in funds to cooperatives and credit unions that take part in overseas development assistance programs.

The omnibus appropriations bill also includes language directing the Federal Trade Commission (FTC) to study the impact and effectiveness of the small issuer exemption to the debit interchange regulation. Specifically, the FTC will report to Congress on the steps it has taken to ensure compliance by payment card networks, and will look for any proof that the payment card networks have favored larger institutions over credit unions that are exempt from the terms of the interchange cap.

CUNA's Donovan said this language "could be valuable in ensuring that the payment card networks continue to operate a two tier system and may help make the small issuer exemption more meaningful," and that CUNA will work with the FTC as this report is developed.