Financial Regulators Release 2014 Bank Secrecy Act/Anti-Money Laundering Examination Manual

‎On December 2, the Federal Financial Institutions Examination Council (FFIEC) released the revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual.  The revisions clarify supervisory expectations and incorporate regulatory changes since the manual's 2010 update.  The revisions incorporate feedback from the banking industry and examination staff.

The Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency, and State Liaison Committee revised the manual in collaboration with the Financial Crimes Enforcement Network (FinCEN), the administrator of the BSA, and the Office of Foreign Assets Control (OFAC).  FinCEN and OFAC collaborated on the revisions made to the sections that address compliance with the regulations and sanctions programs that FinCEN and OFAC administer and enforce.  Manual.  Release.

Second Circuit Affirms Dismissal of $56M MBS Suit against Bank of America

‎On November 25, the United States Court of Appeals for the Second Circuit upheld the dismissal of IKB Deutsche Industriebank AG's suit against Bank of America.  IKB alleged that BofA fraudulently misrepresented the quality of loans underlying mortgage backed securities sold in 2005 and 2006. The court held that the complaint's generalized allegations that BofA knew of claimed mortgage defects by virtue of access to due diligence reports prepared by Clayton and BofA's own due diligence procedures were not sufficient to plead fraudulent intent.  The court also affirmed dismissal of IKB's claim for fraud relating to representations about the transfer of mortgages to the issuing trust, holding that these representations constituted promises to perform in the future and thus were not the proper subject of a fraud claim absent allegations that there was an intent not to perform at the time the promises were made.  Summary Order.

Trustee Representation and Warranty Suit against Morgan Stanley Will Proceed

‎On November 24, Justice Marcy Friedman of the Supreme Court for the State of New York partially dismissed U.S. Bank's suit against sponsor Morgan Stanley Mortgage Capital and originator Greenpoint Mortgage Funding in connection with Morgan Stanley Mortgage Loan Trust 2007-2AX.  Referencing previous decisions made by the court in similar cases, Justice Friedman dismissed the trustee's claim for rescissory damages under the sole remedy provisions in the relevant agreements.  The court denied Morgan Stanley's motion to dismiss based on standing, held the case was timely brought based on the closing date of the transaction, and declined to dismiss claims concerning liquidated loans or claims based on alleged independent discovery of breaches.  Decision.

Fund Managers Sue Citibank for Breach of Contract and Fiduciary Duty

‎On November 24, financial institutions including AEGON, Pacific Investment Management Co., Prudential Financial Inc., Kore Advisors LP, Sealink Funding Ltd., TIAA-CREF Bond Fund, and affiliates, sued Citibank N.A. in the United States District Court for the Southern District of New York.  The plaintiffs purport to sue derivatively on behalf of the securitization trustee, and in the alternative bring a putative class action on behalf of all current certificate holders.  The complaint asserts six causes of action: (1) breach of contract; (2) violation of the Trust Indenture Act; (3) negligent breach of pre-default duty of independence; (4) breach of the fiduciary duty of care; (5) negligent breach of the duty of care; and (6) breach of the post-default fiduciary duty of independence.  The plaintiffs seek damages and costs, as well as an order requiring Citibank to undertake "corrective actions."  Complaint.

EDPS has Published Guidelines on Data Protection in EU Financial Services Regulation

‎On November 25, the European Data Protection Supervisor (EDPS) published guidelines on data protection in EU financial services regulation.

The EDPS aims to ensure that the EU institutions and bodies are aware of data protection requirements and integrate high standards of data protection in all new legislation.

The EDPS notes that much of the information that is required to be gathered by EU legislation relates to legal persons but also notes that there is potential for financial services regulations to interfere with the right of privacy for natural persons.

The EDPS states that the EU legal framework is complex and has prepared for financial services regulation a 10-step methodology which may assist policymakers in anticipating some of the potential difficulties. This methodology is located in section 3 of the Guidelines.  Guidelines.

FCA has Published a Consultation Paper on Regulatory Fees and Levies for 2015/16

‎On November 27, the Financial Conduct Authority (FCA) published for comment a consultation paper on its fees and levies as part of their annual cycle of fees consultation.  The deadline for responses to the consultation is February 2, 2015.  Consultation Paper.