SDBA eNews: September 8, 2016

In This Issue

SDBA Offers Call Report Training in November

The SDBA will hold the Call Report Seminar on Nov. 17 in Sioux Falls to help preparers and reviewers understand the preparation process and eliminate errors.

The training will provide a review and update of new and proposed changes. In August 2016, the Agencies announced additional proposed revisions to the March 2017 call report.

For banks with less than $1 billion in assets, a new FFIEC 051 form is proposed which would reduce the number of pages in the call report from 85 to 60 and would eliminate 40 percent of the existing line items. The frequency of data collection is also proposed for some of the schedules.  More changes are anticipated with an implementation date of March 2018. 

Learn more and register for the seminar.

ABA to Offer Free Webinars on Social Media

ABA members are invited to register for two free webinars on social media practices and risk management.

The first webinar, Social Media as Cyber Risk: Trends in Risk and Fraud, will be held on Thursday, Sept. 22, at 1 p.m. CDT. ABA VP Denyette DePierro and Mike Raggo of ZeroFox will discuss what’s on the horizon in social media risk, including scams, “doxing,” card cracking, social page impersonators, and the role social media plays in developing trust and gathering sensitive information from banks.

The second webinar--which will take place on Oct. 26--will present findings from ABA’s 2016 Social Media in Banking Survey, which polled more than 750 banks of all asset sizes on social media challenges, goals and best practices. Register for the Sept. 22 webinar. Register for the Oct. 26 webinar.

Question of the Week

We received an EFT dispute where the customer lost the card, but the PIN was written on the back of the card. Can we refuse this claim as the customer didn't safeguard the PIN?

Answer: No, unfortunately a customer’s negligence doesn’t protect the bank from liability. The commentary to Reg E provides clarification:

CONSUMER NEGLIGENCE. Negligence by the consumer cannot be used as the basis for imposing greater liability than is permissible under Regulation E. Thus, consumer behavior that may constitute negligence under state law, such as writing the PIN on a debit card or on a piece of paper kept with the card, does not affect the consumer's liability for unauthorized transfers. (However, refer to comment 2(m)-2 regarding termination of the authority of given by the consumer to another person.)


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Contact Alisa DeMers, SDBA, at 800. 726.7322 or via email.

ICBA Sues NCUA Over Unlawful Lending Regulation

The Independent Community Bankers of America (ICBA) yesterday filed a lawsuit against the National Credit Union Administration (NCUA) challenging the agency’s commercial lending rule issued earlier this year. If allowed to stand, the NCUA’s final rule would allow tax-exempt credit unions to exceed limitations on commercial lending activity established by Congress while relaxing regulatory oversight—putting consumers and the financial system at risk.

“The NCUA is attempting to unilaterally expand loopholes for tax-exempt credit unions by sidestepping Congress and putting consumers at risk,” said ICBA President and CEO Camden R. Fine. “This unlawful rule from the NCUA is the latest example of the agency stretching the law beyond its breaking point to serve as the tax-exempt credit union industry’s regulatory rubber stamp.”

In February, the NCUA amended its member business lending regulation so that loans and loan participations purchased from other lenders would not count against the cap. Currently, the cap is established as 1.75 times an institution's net worth or 12.25 percent of total assets, and the ICBA argues that this rule violates the Credit Union Membership Access Act of 1998.

ICBA filed its lawsuit as the NCUA considers a separate field-of-membership proposed rule. That rule would significantly expand the definition of “well-defined local community,” which by law limits the territory a community-based credit union can serve, to include any congressional district. The NCUA could finalize its field-of-membership expansion as early as next Thursday.

The lawsuit, Independent Community Bankers of America v. National Credit Union Administration, was filed in the U.S. District Court of the Eastern District of Virginia. Read more.

FinCEN Issues Advisory on Email Compromise Fraud

With email compromise schemes--in which criminals fraudulently persuade individuals and companies to transfer funds--on the rise, the Financial Crimes Enforcement Network issued an advisory to financial institutions yesterday to help them identify and prevent these frauds. The advisory covered business email compromises, in which criminals target a business customer of a bank, and email account compromises, which are targeted at personal bank accounts. The hallmark of these frauds is that they hack or spoof email accounts to take advantage of employees’ or financial institutions’ trust in existing customer relationships.

Since 2013, email compromise fraud has accounted for $3.1 billion in losses. “In some cases, financial institutions have absorbed losses through reimbursing customers victimized by email compromise fraud,” FinCEN said, noting that preventing this fraud involves collaboration among banks’ compliance, anti-money laundering, fraud and cybersecurity teams.

FinCEN identified several red flags for email compromise fraud, including transaction instructions with different languages, amounts, account information, authorizers and email addresses than are usually used; directions to deposit funds with a foreign bank previously implicated in such schemes; emails marked “urgent” or “secret” or otherwise trying to limit the time a financial institution would spend authenticating the transaction; and follow-up transaction requests seeking additional payments into new accounts.

For financial institutions concerned that they have inadvertently facilitated a fraudulent funds transfer, FinCEN urged immediate reporting of unauthorized transfers to the Federal Bureau of Investigation or the U.S. Secret Service. “FinCEN has had greater success in recovering funds when victims or financial institutions report BEC-unauthorized wire transfers to law enforcement within 24 hours,” it said, noting that these reports are separate from Bank Secrecy Act reporting requirements. Read the advisory.

ABA Rejects Proposal to Expand Money Laundering Risk Assessment

ABA on Wednesday urged the Office of Management and Budget to reject the OCC’s proposed changes to its Bank Secrecy Act/Money Laundering Risk Assessment, or MLR, which evaluates the BSA/AML and OFAC sanctions risks associated with bank products as part of the agency’s BSA/AML/OFAC supervision program.

The OCC has failed to demonstrate the usefulness of the data collected while balanced against the burden of collecting it, the association said. “Without evidence to substantiate the utility of the data and how it serves the purpose of detecting and deterring money laundering and terrorist financing, the MLR is a regulatory exercise that consumes resources that could be better allocated.” Read the letter. For more information, contact ABA’s Rob Rowe.

ABA Seeks Clarified Exam Procedures on MLA Changes

With the Oct. 3 compliance deadline for the Department of Defense’s Military Lending Act (MLA) rule bearing down, ABA last Friday requested examination procedures from the prudential regulators that would clarify how banks will be examined on particular points within the rule.

Specifically, ABA urged the agencies to distinguish between “phony” purchase money loans designed to evade the requirements and legitimate purchase loans with related services and products financed by the loan. ABA asked the agencies to allow lenders to rely on the borrower’s statement that a loan is being used to purchase a vehicle or personal property, which makes the loan exempt from the rule.

ABA also urged the agencies to allow creditors to benefit from the “safe harbor” for determining military status under clarifications made in the Pentagon’s recent interpretive rule and to allow covered borrowers to obtain loans secured by a bank account.

ABA continues to work with the DoD and regulators to ensure that the changes to the rule are implemented with minimal imposition on customer service. To help bankers comply with the changes, ABA has updated its staff analysis on the MLA to reflect the interpretive rule. Read the memo to regulators. Read the updated staff analysis. For more information, contact ABA’s Nessa Feddis.

ABA Seeks Real-Life Stories About Small-Dollar Loans

To help the industry better communicate about the real-world effects of the Consumer Financial Protection Bureau’s proposed rule limiting small-dollar loans, ABA is seeking testimonials from banks’ small-dollar loan customers on why they value this credit product. The stories, which can be as short as one sentence, will be used to illustrate the effects of the proposal in ABA’s comment letter and in other advocacy.

ABA encourages personal, handwritten responses from bank customers. Please ask customers to provide their name, city and state, as well as the bank’s name, with the comment, unless the customer feels uncomfortable doing so. Testimonials must be received by Sept. 28. For more information or to submit testimonials, contact ABA’s Jonathan Thessin. Read ABA’s staff analysis of the proposed rule.

SDBA Currently Selling Advertising in 2017 South Dakota Bank Directory

The SDBA is currently selling advertising in its 2017 South Dakota Bank Directory. The South Dakota Bank Directory is an indispensable reference tool for financial executives and those conducting business with financial decision makers in South Dakota.

Participating in the 2017 South Dakota Bank Directory is a cost-effective advertising strategy that will reach financial industry leaders who utilize this valuable tool on a daily basis and provide an organization with a full year of advertising.

A limited number of full-color ads are now available on the tabbed divider pages. Full-page and half-page black-and-white ads are also available in the front section of the directory. The deadline to place an ad is Friday, Sept. 30. Learn more and place an ad.