account is opened. they comply with ofac search …

2021 IBA Compliance School – Deposit 1

DAY 1 DEPOSIT SCHOOL RECAP

Customer Identification Program 1) True or False?

John Smith has a savings account at your bank. He is asking to open a checking account. Since the CIP rulesapply to a customer defined as “a person that opens a new account,” the bank must collect CIP from John forthe checking account.

2) True or False?Lucia Gonzales, who is not a U.S. Person, would like to open a checking account with your bank. She hasprovided her legal name, address, and date of birth. She has indicated that she does not have a U.S. taxpayeridentification number (either SSN or ITIN). It is still possible for the bank to open this account.

Beneficial Ownership

3) True or False?A bank is required to identify and verify the beneficial owners of each legal entity at the time a newaccount is opened.

4) True or False?FinCEN has confirmed banks are not expected to search all beneficial ownership information to ensurethey comply with OFAC search requirements.

Truth-In-Savings Act Disclosure 5) True or False?

The TISA disclosure for the Quality Club Checking account discloses a “$5.00 Maintenance Fee” per month. When the periodic statement generates this fee is disclosed as “$5.00 Service Charge.” This is acceptable since the consumer will most likely understand they are the same fee.

Subsequent Disclosures 6) True or False?

The bank is going to increase the monthly maintenance fee for your consumer checking account. A 30-day advance change in terms notice is required under Reg. DD.

Advertising 7) True or False?

The bank’s website reflects an advertisement to “Open this Super fantastic account” with only $50. The bank’s TISA disclosure for this same account reflects a minimum opening deposit of $100. This is considered a misleading advertisement.

2021 IBA Compliance School – Deposit 2

DAY 1 DEPOSIT SCHOOL RECAP

The Gramm-Leach Bliley Act (GLBA) – Privacy Notices 8) True or False?

Regulation P of the Gramm-Leach-Bliley Act requires each financial institution to provide a notice of its privacypolicies and practices to its customers who are consumers.

Unfair, Deceptive or Abusive Acts or Practices (UDAAP) 9) The major areas with the greatest potential for UDAAP violations are:

A. Advertising and product descriptionsB. Account and loan disclosuresC. Servicing and collectionsD. Managing and monitoring third party service providersE. Consumer complaintsF. All of the aboveG. A, B, C onlyH. D and E only

Deposit School 2021 1 | P a g e

HOT TOPICS – DEPOSITS & BENEFICIAL OWNERSHIP/CUSTOMER DUE DILIGENCE

TOP ITEMS FROM REVIEWS COMPLETED IN 2020 AND YTD 2021 Truth-in-Savings (Regulation DD) 12 CFR 1030

1. Initial disclosures and periodic statements do not contain consistent terminology when describing bank fees. Official Staff Commentary (OSC) to section 1030.3(a)-2

2. Disclosures required at account opening do not contain all required elements, such as minimum balance required to open the account, balance computation method, etc. 1030.4(b).

3. Certificate of Deposit (CD) renewal notices with a term longer than one year that do not renew

automatically do not contain all required disclosures (i.e. Maturity date and whether interest will be paid after maturity). 1030.5(c)

Spot the violation: CD Maturity Notice – Non-Renewable CD: _____________________________________________

Electronic Fund Transfers (Regulation E) 12 CFR 1005

1. Personnel failed to document final resolution date of bank investigation of error and date on which personnel notified the customer of the investigation results. 1005.11(c)(1)

2. Bank gave final credit to a customer for a reported EFT error. Bank later determined no error occurred and reversed the credit previously provided. 1005.11(c)(2)(iv) FDIC Exam Findings – Regulation E Error Resolution:

3. Customers who report unauthorized electronic transactions are asked to resolve the dispute transaction directly with the merchant prior to the Bank beginning its investigation. After the customer speaks with the merchant, the customer is required to come into the bank to sign a form before personnel will begin the investigation and fund provisional credit. 1005.11(c)

4. Operations staff tracks error disputes on a log. Bank does not retain documents related to customers who dispute EFTs over the phone and do not come into the Bank to sign a form. 1005.13(b)

5. Bank did not send a written notice to the customer upon finding no error occurred and provisional credit was reversed. 1005.11(d)

Spot the violation: ____________________________________________________________________ EFT Error: __________________________________________________________________________

Deposit School 2021 2 | P a g e

HOT TOPICS – DEPOSITS & BENEFICIAL OWNERSHIP/CUSTOMER DUE DILIGENCE

Expedited Funds Availability (Regulation CC) 12 CFR 229

1. Personnel placed a case-by-case hold on a check. Personnel did not make the first $225 of the check available on the day following the date of deposit. 229.10(c)

2. Hold notice did not reflect the business day of deposit. Customer made a deposit on a Saturday, which would have a business day of deposit on the following Monday. 229.2(f) and(g)

Spot the violation Case by Case Hold: ___________________________________________________________________ Reserve Requirement of Depository Institutions (Regulation D) 12 CFR 204

1. Ineligible commercial customers (for-profit corporations, partnerships or limited liability companies (LLCs)) currently own a NOW account. 204.130

Spot the violation NOW Account Eligibility: ______________________________________________________________ Bank Secrecy Act - 31 CFR 1010 and 1020 Beneficial Owners/Customer Due Diligence

1. Bank personnel did not resolve address discrepancy between address provided for a beneficial owner and the address on the verification document. 1010.230(i)(1)(ii)

2. Bank personnel did not obtain a valid, unexpired driver’s license to verify the identity of a beneficial owner. 1010.230(b), 1020.220(a)(2)(ii)(A)(1)

3. Certification of Beneficial Owner Statement dated after account was opened. 1010.230(b)(1)

Spot the Violation Beneficial Ownership Form: ____________________________________________________________

2021 IBA Compliance School – Deposit/Operations 1

REGULATION E RECAP - QUESTIONS

Scenario #1:

- Consumer identifies two suspicious transactions on Monday, April 12 when checking online banking

- Consumer realizes debit card is missing and must have been stolen out of their car Sunday - Consumer notifies the bank of concerns on Wednesday, April 14

1. Did consumer promptly notify the bank?

YES NO

Why?

2. Is it possible that the consumer could have some liability?

YES No Why?

Scenario #2:

- Consumer discovers debit card is missing on Wednesday, October 6 while out of town - Unauthorized debit card transaction posted for $200 on Thursday, October 7 and for $600 on

Monday, October 11 - Consumer received statement on October 22 and immediately calls the bank regarding the

unauthorized transactions


YES NO Why?

2021 IBA Compliance School – Deposit/Operations 2

REGULATION E RECAP - QUESTIONS

4. How much liability is consumer subject to?

A. $0 B. $50

C. $300 D. $500

Why?

Scenario #3:

- Consumer makes purchase on Amazon for $137.50 - $100 unauthorized EFT posts on march 2 - $600 unauthorized EFT on March 6 - Periodic statement issued March 30 - $400 unauthorized EFT on May 10 - $150 unauthorized EFT on June 11 - Consumer notifies the bank on June 11


YES NO

Why?

6. How much liability is the consumer subject to?

A. $0 B. $150 C. $500

D. $1,250

Why?

Iowa Bankers Association 2021

2021 Deposit Compliance School 1

Bonuses, Sweepstakes & Lotteries

Ronette Schlatter, CRCM

Sr. Compliance Analyst III

[email protected]

Session Objectives

• Differentiate between

Bonuses, Sweepstakes &

Lotteries

• Understand elements of a

Compliant Sweepstakes Offer

• Recognize other requirements

& considerations

2021 IBA Deposit Compliance School 2



Bonus, Sweepstakes or Lottery?


Bonus

• Banks are permitted to offer Bonuses

• No state law prohibitions or limits

• TISA – outlines required disclosures and

advertising rules related to Bonuses

• UDAAP considerations

– Are requirements for Bonus clearly detailed in TISA &

ads?

– Is value of Bonus overstated?

– Are Bonuses paid as promoted?




Bonus• Defined in Reg. DD

2021

Premium, gift or award or other consideration

Worth more than $10 (market value; not cost)

Given or offered to consumer during a year

For opening, maintaining, renewing or increasing an account balance

IBA Deposit Compliance School 5

Bonus• In determining $10 value, must aggregate value of items

given per account per calendar year

• “Bonus” does not include:

– Items with a value of $10 or less

– Waivers or reduction of fees for banking-related services (even if

greater than $10)

– Incentives related to purchasing other bank products and

services NOT related to opening, increasing or maintaining a

deposit account

• E.g., signing up for bill pay




Bonus

• When advertising a Bonus, clearly detail:

– The “annual percentage yield,” using that term;

– The time requirement to obtain the bonus;

– The minimum balance required to obtain the bonus;

– The minimum balance required to open the account, if greater

than the minimum balance necessary to obtain the bonus; and

– When the bonus will be provided.

• General reference to “bonus” does NOT trigger disclosures

– “Ask me about our bonus checking!”


Sweepstakes

• Banks are permitted to offer Sweepstakes ad

certain games of chance

• State law governs

• No special TISA rules

• UDAAP considerations

– Are requirements to enter clear?

– Do promotions insinuate chance of winning is increased

w/ accompanying purchase?

– Is sweepstakes paid as promoted?




Sweepstakes

• Sweepstakes include:

– Chance to win and

– Prize but

– NO CONSIDERATION

given for chance to win.

• Drawings at fair booth

• Drawings to celebrate

bank anniversaries


Sweepstakes

• Iowa Prize Promotion (Sweepstakes) Rules, IAC 61 – 32.1

– No purchase/relationship required for chance to win

– Open to non-customers

– Customers don’t have better odds of winning

– Advertise in a way that non-customers will be aware of promotion

– Can’t require person be present to win

– Disclose odds of winning

– Applicable charges related to winning disclosed




Sweepstakes Best Practices

• When advertising a Sweepstakes:

– Clearly detail contest is open to customers & non-customers

– Advertise in mediums noncustomers will see

– Disclose odds of winning

• “Odds of winning depend on number of entrants.”

– Disclose applicable charges related to winning

• E.g., taxes, registration fees, etc.

– Indicate where reader can find sweepstakes rules

– Do not include misleading statements


Lotteries

• Federal Deposit Insurance Act, Sect 20, expressly

prohibits banks from:

– “Dealing in” lottery tickets

– Announcing, advertising or publicizing lottery existence

– Announcing, advertising or publicizing lottery winners

– Permitting use of bank office for these purposes

• Includes:

– Community events

– Charitable fundraisers

– Staff selling tickets on bank premise




FDIA & Lotteries

• Lottery – an advance of money or credit in

exchange for the possibility to receive more

than advanced

• A “lottery” has three elements:

1. Consideration

2. Chance

3. A prize


FDIA & Lotteries

• What is “consideration”???

• Opening an account

• Increasing account balance

• Enrolling in bill pay

• Applying for a loan

• Setting up direct deposit of payroll

• Purchase of bank product/service

• Referring a friend

• And more!!




FDIA & Lotteries

• Banks may:

– Accept deposits & provide banking services

– Display raffle items

• FDIC Deputy General Counsel Private Opinion Letter, Sept 20, 2005

This year’s 4-H Hog Roast & Raffle

promises to be the biggest and best yet!

Purchase your tickets for the hog roast & raffle at:

Rod’s Fishing Tackle and More, Harley’s Cycle Shop, Wilbur’s Save-a-Lot,

First National Bank, Irma’s Clothing and Barney’s Seed and Tack


Lottery, Bonus or Sweepstakes?





Does this ad appear to promote a:

Lottery

Bonus

Sweepstakes








Lottery

Bonus

Sweepstakes







2021 23



Lottery

Bonus

Sweepstakes




Other Considerations

IRS Reporting

• Bonus amounts are considered “interest” if paid to the account

• 1099-MISC reporting if fair market value is over $600 for sweepstakes

– Best practice: Advise entrants of possible tax implications

GLBA Privacy Rules

• The mere fact a consumer is a bank customer is protected

• Obtain written permission to disclose fact consumer is a winner

and/or customer of the bank

• Customer referral programs – both new customer and existing

customer are protected under GLBA

– Get permission to share!


Other Considerations• Use of information on ticket/ballot to enter sweepstakes

for marketing purposes

– Telephone Consumer Protection Act

• Do Not Call rule applies to consumers

• Must comply w/ “do not call” requests

– Junk Fax Protection Act

• Applies to consumers & businesses

• Must provide disclosure of “opt-out” rights

– CAN-SPAM

• Unsolicited commercial messages subject to “labeling” rules

• Must provide “opt-out” rights2021 IBA Deposit Compliance School 26



Other Considerations• Right of Publicity

– Protects commercial use of image, name, likeness, etc.

– Do you have permission to use winner’s name? Pix? Voice?

– http://rightofpublicity.com/brief-history-of-rop

• UDAAP

– Don’t give false impression a consumer has won something or is

close to winning

– Don’t give false impression that purchasing something (or an

account relationship) improves odds of winning

– Clearly detail qualifications and restrictions (if applicable)



http://rightofpublicity.com/brief-history-of-rop

account is opened. they comply with ofac search …

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