Briefing on LIBOR, the BSA/ransomware connection

Is your financial institution ready for the discontinuation of LIBOR? What are regulators saying about virtual currencies’ relationship between BSA and ransomware? Did you know that credit unions are about to get serious about the ‘S’ in CAMELS? 

The Ncontracts expert compliance team covers all these topics and more in this month’s episode of the Ncast podcast Regulatory Brief. Want all the details so you can stay ahead of regulatory change management? Remember you can always log in to Ncomply for updates and implementation guides on changes to state and federal regulations. 

Here are a few highlights from the Ncast Regulatory Brief covering October 2021: 

LIBOR update. HUD is seeking comment on an advanced notice of public rulemaking (ANPR) to determine how the transition away from the London Interbank Offered Rate (LIBOR) interest rate index affects adjustable-rate mortgages (ARMs) insured by the Federal Housing Authority (FHA). LIBOR will become uncertain after December 31, 2021and will cease being published after June 20, 2023. 

HUD needs to decide how it will replace LIBOR for both legacy loans and new originations and plans to issue a proposed rule that:  

• Removes LIBOR as an available interest rate index and provide a new available index for periodic adjustments for newly-insured forward and HECM ARMs; 
• Recommends a replacement comparable index for existing forward mortgages; 
• Implements a Secretary-prescribed replacement index for existing HECMs.  

Meanwhile, the five federal financial institution regulatory agencies (Fed, CFPB, FDIC, OCC, and NCUA) and state regulators issued a statement reminding supervised institutions with LIBOR exposure to continue to strategically transition away from LIBOR and offered insight to what they will be looking for in the transition from a supervisory perspective.  

FinCEN links SARs to Ransomware. According to the Financial Crimes Enforcement Network (FinCEN), when it comes to ransomware related to SARs, the dollar amounts reported during the first six months of 2021 exceed all of 2020.  

FinCEN’s advisory provided specific ransomware related money laundering typologies that financial institutions should be aware of such as:  

• Requesting payments through Anonymity-Enhanced Cryptocurrencies (AECs);  
• Threat actors avoiding the reuse of wallet addresses;  
• Centralized CVC Exchanges are preferred cash out parties; 

And  many other indicators. The advisory also offered detection, mitigation, and reporting tips and obligations for FIs that either experience this type of cybercrime or notice suspicious activity.    

Virtual currency guidance. OFAC issued a comprehensive guide to  those involved in the virtual currency space to help them: 

• Evaluate sanctions-related risks in the virtual currency business;  
• Enhance risk-based sanctions compliance program;   
• Protect the FI from sanctions violations and intentional misuse of virtual currencies by malicious actors;   
• Highlight OFAC’s existing recordkeeping, reporting, licensing, and enforcement processes. 

While FIs already have an OFAC compliance program with risk assessments, internal controls, and training, the guidance explain how to block virtual currency and when blocked property must be reported to OFAC.   

CAMELS for credit unions. The NCUA approved a final rule that adds an ‘S’ (for “Sensitivity”) to CAMEL, making it CAMELS. As part of the change, the NCUA redefined the L (“Liquidity’) and reassigned items related to price and interest rate risk to the “S,” beginning April 2022.  

This change will greatly impact risk management, the CFO, and CEO. Expect to see updated NCUA guidance on this topic and around interest rate risk, updates to their legal opinion letter, and an update to the agency’s examination manual.  

And that's not all! This month’s Regulatory Brief also delved into OCC supervision priorities for 2022, CFPB debt collection and payday lending rules, FDIC real estate lending policies, and the expansion of CUSO lending activities. You can listen here or subscribe on your favorite podcast platform. 

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