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7M BSA penalty levied against Florida bank

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WASHINGTON (3/25/11)— Pacific National Bank, Miami, Fla., has been hit with a $7 million civil money penalty (CMP) for violations of an Office of the Comptroller of the Currency (OCC) consent order, as well as violations of the Bank Secrecy Act (BSA) and the USA PATRIOT Act, the OCC announced Thursday. The Financial Crimes Enforcement Network (FinCEN) also announced the assessment of a concurrent $7 million against Pacific National for the BSA violations, including BSA program implementation faults. The Florida bank neither admitted nor denied the charges. It did consent to paying the assessment in a single $7 million payment to the U.S. Treasury Department. The OCC issued a consent order to the bank late in 2005 that required the institution to enhance is BSA compliance program. The regulator credited the bank with taking “some necessary steps” to improve its program, but noted that efforts fell short of what was needed to bring its program into compliance with regulations and the 2005 order. Specifically, the OCC said, the bank failed in these areas: adequately identifying, monitoring, and reporting suspicious activities; adequately monitoring its foreign correspondent bank accounts; conducting sufficient due diligence; and adequately auditing its high risk areas and the transactions conducted in those areas. FinCEN had its say as well—determining that the bank failed to “implement adequate internal controls and independent testing at a level of consistency necessary to assure compliance with BSA anti-money laundering programs and suspicious activity reporting requirements.” FinCEN said Pacific National lacked “reasonably complete due diligence information for numerous customers,” information that FinCEN said is necessary to effectively monitor transactions and report suspicious activity in a timely manner. The bank violated BSA suspicious activity reporting requirements by filing numerous suspicious activity reports on a delayed or incomplete basis, FinCEN added. "Banks must devote appropriate resources commensurate with their risk profile and must take prompt and necessary steps to comply with the OCC enforcement actions to ensure compliance with the Bank Secrecy Act and the USA Patriot Act," said John Walsh, Acting Comptroller of the Currency, in a release.

CUNA encouraged by Bernanke interchange pledge

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WASHINGTON (3/25/11)--The Credit Union National Association (CUNA) on Thursday said it is encouraged by Federal Reserve Chairman Ben Bernanke’s pledge to ensure that a planned interchange rule carveout for small issuers is effective, but CUNA also emphasized the continued need to press for legislation to delay implementation of the overall rule. CUNA said that the delay, as proposed by bills pending in both the U.S. House and Senate, is imperative because no one outside of the Fed knows what the agency is considering to make good on the chairman’s pledge. Under the terms of the carveout, credit unions and other financial institutions with under $10 billion in assets would be exempt from portions of the proposed interchange rules that would limit the amount of interchange fees charged to twelve cents per card transaction. Bernanke in a speech delivered this week said that the Fed would do everything it could to ensure that this proposed carveout would work as planned. Bernanke's remarks were made before the Independent Community Bank Association's annual meeting. Bernanke has said the Fed may miss the April 21 deadline set by the statute, noting that the agency will have to take as much time as needed to draft the rule appropriately (Bloomberg March 2). Meanwhile, Sen. Richard Durbin (D-Ill.), who authored the interchange legislation, continues to maintain the exemption will shield small credit unions and banks, saying so again during a Thursday press conference. Durbin also noted that he did not anticipate the political response that his interchange legislation has received. CUNA and credit unions have been emphasizing to legislators and the Fed that the small institution exemption has inherent flaws and is unlikely to work. “The likely ineffectiveness of the exemption and the inability to enforce a two-tiered system are concerns voiced by more than 5,000 letters from credit unions in comments to the Federal Reserve Board,” CUNA President/CEO Bill Cheney reminded Durbin in a letter last week. “Commenters also underscored the fatal flaw of not including all costs in determining the interchange rate,” Cheney noted. Additionally, Federal Deposit Insurance Corporation Chairman Sheila Bair last month told the Senate Banking Committee that the interchange changes could harm small financial institutions far more than they would help merchants. A number of regulators and legislators have also noted that the proposed $10 billion exemption is likely to be impotent to protect small issuers. Bair more recently has said that the planned interchange fee regulation changes would not work in practice and needed “to be fixed." CUNA has repeatedly said that to ensure that the planned exemption is effective, Congress should halt the progress of the interchange rule. If an agreement to delay implementation cannot be reached, CUNA has called on the Fed to do all it can to ensure that the proposed exemption works as Congress said it would. CUNA has estimated that up to 67% of credit unions would lose money on their debit card programs if the interchange regulations reduced interchange-related revenues by 40%. A final version of the interchange rule is scheduled for an April release, and would become effective in late July. Legislation that would delay the implementation of the interchange fee cap has been introduced in the Senate and House. The two bills would also order regulators to study the impact that the proposed interchange rules would have on credit unions, small issuers, consumers and merchants.

Inside Washington (03/24/2011)

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* WASHINGTON (3/25/11)—Two congressional hearings of interest to credit unions were announced yesterday: one on the nation’s housing policy by the Senate Banking Committee and one on the implementation costs associated with the Dodd-Frank Wall Street Reform Act, to be conducted by a House subcommittee. The Senate Banking Committee will hold a hearing on public proposals for the future of the housing finance system on March 29 at 10 a.m. ET. Witnesses scheduled to appear are Michael Berman, chairman, Mortgage Bankers Association; Mark Zandi, chief economist, Moody’s Analytics; and Janneke Ratcliffe, senior fellow, Center for American Progress. Additional witnesses may be announced. In the House, the Financial Services subcommittee on oversight and investigations announce it will examine the costs and economic impact associated with implementing the approximately 300 rules created under the Dodd-Frank Act. The March 30, 2 p.m. (ET) session will feature witnesses from the government and academia. Subcommittee Chairman Randy Neugebauer (R-Texas), in announcing the hearing, said, “it is imperative for agencies to undertake a rigorous cost-benefit analysis of each (rule) to minimize these costs to the economy” …

Fed to hold periodic updates on FOMC projections

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WASHINGTON (3/25/11)—The Federal Reserve on Thursday announced that it will “further enhance the clarity and timeliness” of its monetary policy communication through quarterly press briefings by Fed Chairman Ben Bernanke. Bernanke will present the Federal Open Market Committee's (FOMC) economic projections and provide additional context for committee’s policy decisions during these briefings. The Fed has scheduled briefings for 2:15 P.M. ET on April 27, June 22 and November 2. The briefings will follow FOMC decisions, and will be broadcast live via webcast. The FOMC conducts eight meetings each year to review economic and financial conditions, determine issues involving monetary policy, and assess risks to price stability and sustainable economic growth. The committee is comprised of seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.

Small business group reiterates MBL support

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WASHINGTON (3/25/11)—Saying it is “confident that the nation’s credit unions stand ready to extend critical capital to America’s small-business owners,” the National Small Business Association (NSBA) this week again backed legislation that would lift the cap on credit union member business lending (MBL). This round of MBL cap lift support came in the form of a letter to Sen. Mark Udall (D-Colo.). Udall is the chief sponsor of the Small Business Lending Enhancement Act (S. 509), a bill that would lift the MBL cap to 27.5% of a credit union’s total assets. A total of 18 cosponsors have signed on to support that bill since it was introduced on March 8. The letter called on Congress to do “everything within its power to encourage and expand small-business lending. “If the nation’s credit unions stand ready, willing, and able to increase their lending to small firms beyond their current statutory cap of 12.25 percent of assets, then Congress immediately should increase credit unions’ small-business lending cap,” the letter added. Credit Union National Association (CUNA) research has shown that the increased MBL cap could provide up to $13 billion to small businesses in the first year alone and create over 140,000 new jobs. CUNA underscores that these economic benefits come at no cost to taxpayers. Tens of thousands of credit union advocates have urged their respective representatives to support the MBL legislation, and credit union representatives across the country are discussing several credit union-related issues this week during individual meetings and public town halls in their home districts.