CFTC Provides No-Action Relief from Introducing Broker and Commodity Trading Advisor Registration to Non-U.S. Persons Who Advise on or Facilitate Swaps Transactions for Certain International Institutions
The Division of Swap Dealer and Intermediary Oversight (DSIO) of the Commodity Futures Trading Commission (CFTC) announced on June 5 that it had issued a no-action letter providing relief from registration as an introducing broker or commodity trading advisor for persons located outside the United States that facilitate swap transactions for International Financial Institutions (IFIs) that have offices in the United States. In the letter, DSIO states that the relief is appropriate in light of the unique attributes and status of IFIs, and in consideration of international comity. In the letter, DSIO has listed the entities defined as IFIs, including such institutions and organizations as the International Monetary Fund, International Bank for Reconstruction and Development, European Bank for Reconstruction and Development and the International Development Association.
The CFTC Division of Market Oversight announced on June 15 that it had issued Staff Letter 15-38, extending the time-limited relief previously provided in Staff Letter 14-90, expiring on June 30, 2015, to June 30, 2016. The relief is provided to Swap Dealers (SDs) and Major Swap Participants (MSPs) from the obligation to report valuation data for cleared swaps as required by section 45.4(b)(2)(ii) of the CFTC’s regulations. The no-action relief applies to: (1) all SDs and MSPs that are reporting counterparties under regulation 45.8, for the purposes of regulation 45.4(b)(2)(ii), and (2) all cleared swaps for which the SD or MSP has the obligation to report valuation data under regulation 45.4(b)(2)(ii).
On June 16, the FDIC issued a Notice of Proposed Rulemaking (NPR) and request for comment on proposed refinements to the deposit insurance assessment system for small insured depository institutions. The proposed rule would affect banks with under $10 billion in assets that have been FDIC insured for at least five years. It would base assessments on a model estimating the probability of failure over three years using data from the financial crisis and prior years. That model would be revenue neutral, so that it does not change the aggregate assessment revenue collected from small banks. The FDIC has published an online assessment calculator that will allow institutions to estimate their assessment rates under the proposal. Comments are due within 60 days of publication in the Federal Register.
The FRB, the FDIC, and the OCC finalized revisions to the regulatory capital rules on June 16. The final rule, applicable only to certain large, internationally active banking organizations (advanced approaches banking organizations), makes changes to aspects of the advanced approaches rule, including the calculation requirements for risk-weighted assets for advanced approaches banking organizations. Many of the changes enhance the consistency of the advanced approaches rule with international capital standards. The revised rule goes into effect on October 1, 2015.
As reported in last week’s Roundup, federal agencies issued a final policy statement establishing joint standards for assessing the diversity policies and practices of the entities they regulate. Notice of the statement has since been published in the Federal Register.
Enforcement & Litigation
The Financial Crimes Enforcement Network (FinCEN) on June 15 announced the assessment of a $4.5 million civil money penalty against Bank of Mingo of Williamson, West Virginia (Mingo), for willfully violating the Bank Secrecy Act (BSA). FinCEN found that Mingo had severe and systemic failures in many aspects of its anti-money laundering (AML) program. As a result of these failures, FinCEN found that Mingo processed millions of dollars in structured and suspicious cash transactions through the institution. According to FinCEN, Mingo serviced high-risk customers without effectively monitoring their accounts for suspicious activity. In one example cited by FinCEN, Mingo was aware of a high volume of unusual cash transactions conducted by a corporate customer, yet failed to file the requisite currency transaction reports (CTRs) or suspicious activity reports (SARs). That customer conducted over $9 million worth of structured transactions through Mingo’s Williamson Branch. The manager of that branch was convicted in April 2014 of knowingly making a false statement to federal law enforcement agents during an investigation of that scheme to evade BSA reporting requirements. FinCEN coordinated its enforcement action with actions by the FDIC and the U.S. Attorney’s Office for the Southern District of West Virginia. The total penalty of $4.5 million will run concurrently with a $3.5 million penalty by the FDIC, of which $2.2 million is concurrent with the amount forfeited pursuant to the deferred prosecution agreement with the U.S. Attorney’s Office.