Acting Comptroller Discusses Consolidated Supervision of Crypto-Asset Intermediaries

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today offered remarks to the Financial Stability Board’s Crypto Working Group.

In his remarks, Mr. Hsu shared his perspective on the importance of coordination and collaboration on the supervision of global institutions, particularly with regard to crypto-asset activities. He also discussed the relationship between crypto and tokenization.

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READOUT: Assistant Secretary for International Finance Brent Neiman’s Travel to Ecuador

QUITO – On February 21, Assistant Secretary Brent Neiman visited Quito and met with senior members of President Noboa’s administration, including Presidential Chief of Staff Arturo Felix Wong, Finance Minister Juan Carlos Vega, Monetary Policy and Regulation Board President Tatiana Rodriguez, and Central Bank General Manager Guillermo Avellán.

Assistant Secretary Neiman expressed Treasury’s support for the Ecuadorian people in light of recent security challenges. He welcomed efforts by the authorities to restore fiscal stability and encouraged them to continue to engage productively with international financial institutions to potentially secure new financing. Assistant Secretary Neiman also highlighted the important efforts of Treasury’s Office of Technical Assistance, which has advisors working with Ecuadorian officials and regulators across topics including government finance, banking and financial services, payment systems, and economic crimes.

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Acting Comptroller Discusses Banking and Commerce

WASHINGTON—Acting Comptroller of the Currency Michael J. Hsu today discussed banking and commerce, regulatory effectiveness, and financial stability in remarks at Vanderbilt University in Nashville, Tenn.

In his remarks, Mr. Hsu discussed the blurring of the lines between banking and commerce in payments and private credit/equity, and how this might lead to financial instability. He also offered thoughts on the potential for the Financial Stability Oversight Council’s recently adopted analytic framework to identify and address financial stability risks as they emerge.

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United States and United Kingdom Hold Third Joint Committee Meeting under the Bilateral Agreement on Prudential Measures Regarding Insurance and Reinsurance

On the 20th of February 2024, the United States and the United Kingdom held the third meeting of the Joint Committee established under the U.S.-UK Agreement on Prudential Measures Regarding Insurance and Reinsurance (“the Agreement”). The United States and the United Kingdom signed the Agreement on December 18, 2018, and the Agreement entered into force on December 31, 2020. 

The Agreement, which is a “covered agreement” as defined by the Dodd-Frank Act for the United States, addresses three areas of prudential insurance oversight: (1) reinsurance; (2) group supervision; and (3) the exchange of insurance regulatory information between supervisors. 

The Joint Committee meeting was hosted virtually by the United States, and attended by representatives from the U.S. Department of the Treasury, the Office of the U.S. Trade Representative, His Majesty’s Treasury, and the Prudential Regulation Authority of the United Kingdom, as well as by a U.S. state insurance commissioner and a representative of the Federal Reserve Board. 

During the meeting, participants on both sides provided updates regarding the implementation and administration of the Agreement with regard to reinsurance (including collateral and local presence), group supervision, and exchange of information. Both sides reaffirmed the importance of the Agreement and acknowledged that the Agreement is functioning well and is an important element of regulatory cooperation between the parties.  Both sides also reaffirmed their commitment to continuous review of progress under the Agreement and to close coordination concerning prudential matters under the Agreement. Consistent with the Agreement, both sides are continuing to encourage relevant authorities to refrain from taking any measures that are inconsistent with any of the provisions of the Agreement. 

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United States Sanctions Affiliates of Russia-Based LockBit Ransomware Group

The United States imposes sanctions on affiliates of group responsible for ransomware attacks on the U.S. financial sector

WASHINGTON — Today, the United States is designating two individuals who are affiliates of the Russia-based ransomware group LockBit. This action is the first in an ongoing collaborative effort with the U.S. Department of Justice, Federal Bureau of Investigation, and our international partners targeting LockBit.

“The United States will not tolerate attempts to extort and steal from our citizens and institutions,” said Deputy Secretary of the Treasury Wally Adeyemo. “We will continue our whole-of-government approach to defend against malicious cyber activities, and will use all available tools to hold the actors that enable these threats accountable.” 

Russia continues to offer safe harbor for cybercriminals where groups such as LockBit are free to launch ransomware attacks against the United States, its allies, and partners. These ransomware attacks have targeted critical infrastructure, including hospitals, schools, and financial institutions. Notably, LockBit was responsible for the November 2023 ransomware attack against the Industrial and Commercial Bank of China’s (ICBC) U.S. broker-dealer. The United States is a global leader in the fight against cybercrime and is committed to using all available authorities and tools to defend Americans from cyber threats. In addition to the actions announced today, the U.S. government provides critical resources to support potential victims in protecting against and responding to ransomware attacks. For example, last year, the Cybersecurity & Infrastructure Security Agency in conjunction with other U.S. Departments and Agencies and foreign partners published two cybersecurity advisories, “Understanding Ransomware Threat Actors: LockBit” and “LockBit 3.0 Ransomware Affiliates Exploit CVE 2023-4966 Citrix Bleed Vulnerability.” These advisories detail the threats posed by this group and provide recommendations to reduce the likelihood and impact of future ransomware incidents. 

This action follows other recent actions taken by the U.S. against Russian cybercriminals, including the recent trilateral designation of Alexander Ermakov, a Russian national involved in the 2022 ransomware attack against Medibank Private Limited, in coordination with Australia and the United Kingdom and last year’s bilateral sanctions actions against the Trickbot Cybercrime Group with the United Kingdom. Russia has enabled ransomware attacks by cultivating and co-opting criminal hackers. Treasury has previously stressed that Russia must take concrete steps to prevent cyber criminals from freely operating in its jurisdiction. Today’s actions reflect the United States’ commitment to combatting cybercrime and pursuing the bad actors that target victims across the United States, its allies, and its partners.

LOCKBIT: A MALICIOUS RUSSIAN RANSOMWARE GROUP

LockBit is a Russia-based ransomware group first observed in 2019 and best known for its ransomware variant of the same name. LockBit operates on a Ransomware-as-a-Service (RaaS) model, where the group licenses its ransomware software to affiliated cybercriminals in exchange for a percentage of the paid ransoms. LockBit is known for its double extortion tactics, where its cybercriminals exfiltrate vast amounts of data from its victims before encrypting the victim’s computer systems and demanding ransom payments. LockBit was the most deployed ransomware variant globally in 2022 and remains prolific today.  

OFAC’s investigation identified LockBit as responsible for the ransomware attack on ICBC, which occurred on November 9, 2023. The ransomware attack disrupted ICBC’s U.S. broker-dealer, affecting the settlement of over $9 billion worth of assets backed by Treasury securities. The ransomware attack caused a blackout of ICBC’s computer systems, resulting in a loss of e-mail and communications. ICBC’s inability to access its systems caused securities to be delivered for settlement with no funds backing the trades. 

OFAC TARGETS AFFILIATES OF LOCKBIT RANSOMWARE GROUP

Ivan Gennadievich Kondratiev, a Russian national located in Novomokovsk, Russia, is a LockBit affiliate and leader of the LockBit affiliate sub-group, the National Hazard Society. Kondratiev is commonly known in the cybercriminal world as “Bassterlord” and “Fisheye,” and he also has ties to REvil, RansomEXX and Avaddon ransomware groups. Kondratiev has actively engaged in LockBit ransomware attacks.   

Artur Sungatov, a Russian national, is a Lockbit ransomware group affiliate and has actively engaged in LockBit ransomware attacks. 

OFAC is designating each of these individuals pursuant to Executive Order (E.O.) 13694, as amended by E.O. 13757, for being responsible for or complicit in, or having engaged in, directly or indirectly, an activity described in subsection (a)(ii)(D) of section 1 of E.O. 13694, as amended.

SANCTIONS IMPLICATIONS 

As a result of today’s action, all property and interests in property of the designated persons described above that are in the United States or in the possession or control of U.S. persons are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked. Unless authorized by a general or specific license issued by OFAC, or exempt, OFAC’s regulations generally prohibit all transactions by U.S. persons or within (or transiting) the United States that involve any property or interests in property of designated or otherwise blocked persons. In addition, persons that engage in certain transactions with the individuals designated today may themselves be exposed to designation. 

The power and integrity of OFAC sanctions derive not only from its ability to designate and add persons to the Specially Designated Nationals and Blocked Persons (SDN) List but also from its willingness to remove persons from the SDN List consistent with the law. The ultimate goal of sanctions is not to punish but to bring about a positive change in behavior. For information concerning the process for seeking removal from an OFAC list, including the SDN List, please refer to OFAC’s Frequently Asked Question 897 here. For detailed information on the process to submit a request for removal from an OFAC sanctions list, please click here.

See OFAC’s Updated Advisory on Potential Sanctions Risk for Facilitating Ransomware Payments for information on the actions that OFAC would consider to be mitigating factors in any related enforcement action involving ransomware payments with a potential sanctions risk. For information on complying with sanctions applicable to virtual currency, see OFAC’s Sanctions Compliance Guidance for the Virtual Currency Industry.

For more information on the individuals designated today, click here.

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Agencies Issue 2023 Shared National Credit Program Report

Federal bank regulatory agencies today reported in the 2023 Shared National Credit (SNC) report that credit quality associated with large, syndicated bank loans remains moderate. However, the agencies noted declining credit quality trends due to the pressure of higher interest rates on leveraged borrowers and compressed operating margins in some industry sectors.

Risks in leveraged loans remain high, and risks in certain industries, including technology, telecom and media; health care and pharmaceuticals; and transportation services are also elevated. Risk in the real estate and construction sector is segmented, with deteriorating trends in some sub-sectors being offset by stability and/or improvement in other sub-sectors. Industries affected by the pandemic, including transportation services and entertainment/recreation, continue to show notable improvement.

The 2023 review reflects the examination of SNC loans originated on or before June 30, 2023. The review focused on leveraged loans and stressed borrowers from various industry sectors.

The 2023 SNC portfolio included 6,589 borrowers, totaling $6.4 trillion in commitments, an increase of 8.7 percent from a year ago. The percentage of loans that deserve management’s close attention (“non-pass” loans comprised of SNC commitments rated “special mention” and “classified”) increased from 7.0 percent of total commitments to 8.9 percent year over year. While U.S. banks hold 46 percent of all SNC commitments, they hold only 20 percent of non-pass loans. Nearly half of total SNC commitments are leveraged, and leveraged loans comprise 86 percent of non-pass loans.

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OCC Announces Enforcement Actions for February 2024

WASHINGTON—The Office of the Comptroller of the Currency (OCC) today released enforcement actions taken against national banks and federal savings associations (banks), and individuals currently and formerly affiliated with banks the OCC supervises.

The OCC uses enforcement actions against banks to require the board of directors and management to take timely actions to correct the deficient practices or violations identified. Actions taken against banks are:

  • Cease and Desist Order against Blue Ridge Bank, N.A., Martinsville, Virginia, for unsafe or unsound practices, including those related to the Bank Secrecy Act (BSA)/anti-money laundering (AML), capital ratios, capital and strategic planning, liquidity risk management, and information technology controls. The deficiencies in the BSA/AML compliance program resulted in violations of law, rule, or regulation, and the bank also failed to correct previously reported BSA problems. (Docket No. AA-ENF-2023-68). The OCC also terminated the bank’s formal agreement dated August 29, 2022, which was superseded by the cease and desist order. (Docket No. AA-ENF-2024-13).
  • Cease and Desist Order, Order for Civil Money Penalty, and Gramm-Leach-Bliley Agreement against City National Bank, Los Angeles, California, for unsafe or unsound practices, including systemic deficiencies related to the bank’s operational, compliance, investment management, and strategic risk management and internal controls; noncompliance with certain guidelines establishing heightened standards applicable to the bank; and certain violations of law, rule, or regulation related to the Bank Secrecy Act and 12 CFR Part 9 – Fiduciary Activities of National Banks. The assessed civil money penalty is $65 million. The bank also executed an agreement with the OCC to comply with certain requirements related to controlling or holding an interest in financial subsidiaries. Refer to OCC News Release 2024-8. (Docket Nos. AA-ENF-2024-7 and AA-ENF-2024-8 and No. 2023-016)
  • Formal Agreement with The First National Bank of St. Ignace, St. Ignace, Michigan, for unsafe or unsound practices, including those related to capital planning, capital stress testing, and strategic planning, and a violation of law, rule, or regulation related to payment of dividends. (Docket No. AA-CE-2024-1)

The OCC uses enforcement actions against an institution-affiliated party (IAP) to deter, encourage correction of, or prevent violations, unsafe or unsound practices, or breaches of fiduciary duty. Enforcement actions against IAPs reinforce the accountability of individuals for their conduct regarding the affairs of a bank. The term “institution-affiliated party,” or IAP, is defined in 12 USC 1813(u) and includes bank directors, officers, employees, and controlling shareholders. Orders of Prohibition prohibit an individual from any participation in the affairs of a bank or other institution as defined in 12 USC 1818(e)(7). Actions taken against IAPs are:

  • Order of Prohibition and Order for Civil Money Penalty against Stephen Adams, Former Senior Vice President and Managing Director of Residential Lending, Sterling Bank and Trust, FSB, Southfield, Michigan, for his role in failing to appropriately supervise, investigate, and discipline employees originating residential mortgage loans. The assessed civil money penalty is $50,000. (Docket No. AA-ENF-2023-71)
  • Personal Cease and Desist Order against Colleen Kimmel, Former General Counsel, Sterling Bank and Trust, FSB Southfield, Michigan, for her role in not ensuring the bank conducted or suggesting to the Board that the bank conduct an investigation into concerns related to a residential mortgage loan product, not ensuring the bank’s BSA program had an adequate system of internal controls, and not timely reporting suspicious activity related to certain residential mortgage loans. (Docket No. AA-ENF-2023-69)
  • Personal Cease and Desist Order against Jonathan Kolk, Former Residential Underwriting Manager, Sterling Bank and Trust, FSB Southfield, Michigan, for capitulating to pressure to quickly underwrite certain residential mortgage loans and his role in underwriting, and supervising the underwriting of, loans that had false or fraudulent loan applications. (Docket No. AA-ENF-2023-70)
  • Order of Prohibition against Cole R. Mann, Former Branch Banker in a Tucson, Arizona branch of PNC Bank, National Association, Wilmington, Delaware, for stealing, embezzling, or otherwise misappropriating funds from the bank and a bank customer. (Docket No. AA-ENF-2023-65)
  • Order of Prohibition against Chimere Shanta Mitchell, Former Fraud and Claims Operations Specialist at an Alabama office of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for misappropriating confidential information of bank customers, including more than 20 elderly customers, and selling the information to a third party, resulting in fraudulent transactions. (Docket No. AA-ENF-2024-9)
  • Order of Prohibition against Aaron Parsons, Relationship Banker at a Kent, Connecticut branch of Webster Bank N.A., Stamford, Connecticut, for making unauthorized withdrawals from the accounts of bank customers, including four elderly customers, and depositing the funds into his own bank account. (Docket No. AA-ENF-2024-6)
  • Decision on Entry of Default and Order of Prohibition against Nyema’sha Taylor, Former Teller at an Atlanta, Georgia branch of Wells Fargo Bank, N.A., Sioux Falls, South Dakota, for knowingly processing unauthorized cash withdrawals from a customer’s account. (Docket AA-ENF-2021-23)
  • Order of Prohibition against Francis Andujar Velazquez, Former Senior Customer Service Representative, Santander Bank, Wilmington, Delaware, for misappropriating funds from customers’ accounts by making purchases using confidential bank customer information and selling confidential information of bank customers to a third party and facilitating fraudulent transactions. (Docket No. AA-ENF-2023-42)
  • Order of Prohibition against Mirsha Yamili Wilson, Former Associate Banker, JPMorgan Chase Bank, N.A., Columbus, Ohio, for taking cash used to supply a bank branch’s ATMs and concealing the shortage. (Docket No. AA-ENF-2023-67)

The OCC terminates enforcement actions including when a bank has demonstrated compliance with all articles of an enforcement action or when the OCC determines that articles deemed “not in compliance” have become outdated or irrelevant to the bank’s current circumstances. Termination actions include:

  • Order Terminating the Cease and Desist Order against Wells Fargo Bank, N.A., Sioux Falls, South Dakota, dated September 16, 2016 (Docket No. AA-EC-2016-66), for deficiencies and unsafe or unsound practices in the bank’s risk management and oversight of the bank’s sales practices, and unsafe or unsound sales practices by the bank. (Docket No. AA-ENF-2024-11)

To receive alerts for news releases announcing public OCC enforcement actions, subscribe to OCC Email Updates.

All OCC public enforcement actions taken since August 1989 are available for download by viewing the searchable enforcement actions database at https://apps.occ.gov/EASearch.

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OCC Releases Dodd-Frank Act Stress Test Scenarios for 2024

WASHINGTON—The Office of the Comptroller of the Currency (OCC) released economic and financial market scenarios for use in the upcoming stress tests for covered institutions.

The supervisory scenarios include baseline and severely adverse scenarios, as described in the OCC’s rule that implements the stress testing requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.

Section 165(i)(2) of the Dodd-Frank Act, as amended by the Economic Growth, Regulatory Relief, and Consumer Protection Act, requires certain financial companies, including certain national banks and federal savings associations, to conduct periodic stress tests. The OCC’s stress testing rule states that the OCC will provide scenarios to covered institutions by February 15 of each year.

Covered institutions are required to use the scenarios to conduct stress tests. The results of the company-run stress tests provide the OCC with forward-looking information used in bank supervision and assist the agency in assessing a covered institution’s risk profile and capital adequacy.

The 2024 scenario and background information can be found on the OCC’s Dodd-Frank Act Stress Test (Company Run) page. The final policy statement on the development and distribution of the scenarios was issued on October 28, 2013, in the Federal Register.

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READOUT: At Spelman College, Deputy Secretary of the Treasury Wally Adeyemo Highlights New Efforts to Reduce Economic Disparities in Underserved Communities

Deputy Secretary Adeyemo announces Treasury Department’s Equity Action Plan

ATLANTA, GA – Today, in recognition of Black History Month, U.S. Deputy Secretary of the Treasury Wally Adeyemo joined a fireside conversation at Spelman College entitled “A Conversation on Building Black Wealth & The Growth of the U.S. Economy.” During the conversation, which was co-hosted by the Black Economic Alliance and moderated by Spelman College Board Chair Emerita Roz Brewer, Deputy Secretary Adeyemo highlighted the Biden-Harris Administration’s investments in economic recovery and long-term community development, including for Black and other underserved communities, and shared upcoming initiatives to reduce economic disparities. 

Initiatives spearheaded by the Treasury Department include funding community financial institutions with a proven track record of lending to underserved businesses and communities. Through the Emergency Capital Investment Program, for example, the Treasury Department has invested $1.4 billion in Black-owned and Black-majority shareholder depository institutions. ECIP investments are projected to increase lending within Black communities by nearly $80 billion over the next decade. 

During the fireside conversation, Deputy Secretary Adeyemo announced the release of the Treasury Department’s Equity Action Plan (EAP). This report outlines six strategies to address inequity, focusing on long-standing barriers to building wealth among marginalized communities. The new EAP comes as the Department leads implementation of President Biden’s Investing in America agenda, including unlocking the hundreds of billions of dollars in clean energy investments through the Inflation Reduction Act.  

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READOUT: Treasury Department Convenes Discussion on Financial Inclusion for Tribal Communities

Discussion part of Treasury leadership’s efforts to engage diverse communities in developing Department’s financial inclusion strategy 

WASHINGTON – Today, U.S. Treasurer Chief Lynn Malerba and Deputy Assistant Secretary for Consumer Policy Suzanna Fritzberg chaired a convening with Tribal leaders, Native American leaders of community development financial institutions (CDFIs), a Tribal College, and the private sector, and representatives from the across the Biden-Harris Administration, to discuss the need to expand Tribes’ access to financial services. Today’s convening is one of many hosted by the Treasury Department as it develops a national strategy for financial inclusion to address persistent gaps for underserved communities. 

During the convening, Chief Malerba delivered remarks highlighting the importance of financial inclusion to advance economic development in Tribal communities. While lack of access to capital and credit markets created economic disparities in Native communities, economic opportunities unlocked by President Biden’s historic suite of legislation – including the American Rescue Plan, Inflation Reduction Act, and Bipartisan Infrastructure Law – have increased Native business growth and Tribal economic development. 

In December 2023, the Treasury Department released a request for information to inform its development of a national strategy for financial inclusion. The comment period for the RFI closes on February 20, 2024. Treasury is engaging with a wide variety of stakeholders to ensure that the strategy identifies clear actions to enhance financial inclusion and promote a stable  financial system that provides the infrastructure to ensure all households can meet their needs and achieve their financial goals. 

 

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