Monthly Bulletin – August 2023

Volume 11, Number 1

Agenda

• Update on cyber threats and defenses. Supervisory Special Agent (SSA) Michael Sohn with the Federal Bureau of Investigation (FBI).
• Common opportunities to improve 3rd-party risk. Department Financial Protection and Innovation.
• SecureTheVillage’s innovative new program to help financial service organizations measurably improve their cybersecurity.
• LA County Department of Economic Opportunity programs to help financial service companies acquire technical staff to meet their cybersecurity needs.

Please register in advance for this meeting. After registering, you will receive a confirmation email containing information for joining the meeting.

IT System Survey for Banks, CUs

The DFPI has sent out its biennial IT survey to all banks, including Foreign Banking Organizations, Credit Unions, and Trust Companies. The survey was emailed on July 29 to each institution’s designated email address in accordance with Financial Code section 331.5.

The email contains a secure link to your individual institutions survey. The electronic 2023 IT Systems Survey is designed to help the DFPI assess the level of each licensee’s IT risk, allocate resources, and prepare for examinations.

Licensees are required to submit the survey pursuant to Financial Code section 455. Responses are kept confidential and used only in the examination process.

The survey was sent out on July 29 and will be due no later than August 31, 2023. If you have questions, please contact:

For Banks, Trust Companies, Foreign Banks, and Foreign Branches:

Financial Institutions Manager Matthew Fujikawa at matthew.fujikawa@dfpi.ca.gov or Senior Financial Institutions Examiner Anthony Campbell at anthony.campbell@dfpi.ca.gov.

For Credit Unions:

Senior Financial Institutions Examiner Eric Kwon at eric.kwon@dfpi.ca.gov.

For technical concerns:

survey@dfpi.ca.gov.

Crypto HYIP Enforcement Actions

On Aug. 9, the DFPI announced desist and refrain orders against three different entities for violations of California securities laws. Each of these entities allegedly offered and sold unqualified securities and made material misrepresentations and omissions to investors related to crypto asset investments. These orders continue DFPI’s efforts against High-Yield Investment Programs (HYIP) relating to crypto assets.

As part of a new social media campaign aimed at alerting current and prospective investors of these investment scams, the DFPI has posted short videos to all of its social media feeds for the three entities subject to these orders: CloudFi, CoinMarketBull, and Vortic United. These videos provide an overview of the enforcement actions and the violations of law that the DFPI found.

Multi-State Action Against Lear Capital

On Aug. 1, the DFPI announced that investors that purchased retail precious metals from Los Angeles based Lear Capital, Inc. will receive compensation as a part of Lear’s bankruptcy plan. State securities regulators had been investigating Lear for deceptive securities and commodities activities and misleading marketing at the time of the company’s bankruptcy.

Various regulators across the country alleged that Lear Capital, Inc., which sells and buys back metals through both direct-to-consumer transactions and self-directed IRA transactions, used deceptive business practices, and violated investor protection laws. These actions were resolved as part of the $5.5 million bankruptcy settlement. Under the terms of the bankruptcy plan, Lear will be required to provide $5.5 million to investors of Lear’s precious metals. Lear investors that filed a timely bankruptcy claim will receive refunds based on calculations determined by Lear’s bankruptcy plan.

Student Loan Repayment Restart Webinar

On Aug. 16, the DFPI will host a webinar titled “Preparing for the Student Loan Repayment Restart.” The webinar is open to the public and will provide information on how to prepare to effectively manage student loans and cover resources, tools, repayment options, and other strategies as well as any new guidance from the U.S. Department of Education. Registration is available online.

Payday Lending Annual Report

The DFPI has published the 2022 Annual Report of Payday Lending Activity Under the California Deferred Deposit Transaction Law. The annual report contains data submitted and compiled by licensed deferred deposit originators, commonly known as payday lenders. Under the California Deferred Deposit Transaction Law (Financial Code section 23026) requires licensees to file annual reports to the DFPI Commissioner providing information related to their lending activities under the program.

California Residential Mortgage Lending Act Annual Report

The DFPI has published the 2022 Annual Report of Activity under the California Residential Mortgage Lending Act. The CRMLA Annual Report provides detailed information on residential mortgage lending loans, rates, consumer complaints, foreclosures, and other data elements for calendar year 2022.  Due to the financial market conditions during the reporting period, which included periods of high inflation combined with volatility, a slowdown in consumer spending and rising interest rates, there was a sharp decline in Californians refinancing existing mortgages and making new home purchases in 2022. Financial Code section 50307(a) requires licensees to file with the DFPI Commissioner annual reports that provide information related to their lending activities under the program.

Updates to the BSA/AML Examination Manual

The Federal Financial Institutions Examination Council (FFIEC), on behalf of its members, released updates to the following sections of the Bank Secrecy Act/Anti-Money Laundering Examination Manual.

• Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activity
• Due Diligence Programs for Correspondent Accounts for Foreign Financial Institutions
• Due Diligence Programs for Private Banking Accounts
• Prohibition on Correspondent Accounts for Foreign Shell Banks; Records Concerning Owners of Foreign Banks and Agents for Service of Legal Process
• Summons or Subpoena of Foreign Bank Records; Termination of Correspondent Relationship; Records Concerning Owners of Foreign Banks and Agents for Service of Legal Process
• Reporting Obligations on Foreign Bank Relationships with Iranian-Linked Financial Institutions

The updates should not be interpreted as new instructions or increased focus on certain areas; instead, they offer further transparency into the examination process and support risk-focused examination work. Details are available at https://bsaaml.ffiec.gov.

LICENSEE ACTIVITY

Commercial Bank Activity

Acquisition of Control

Big Poppy Holdings, Inc., to acquire control of Summit State Bank
Filed: 7/17/23

Premium Finance Company Activity

New Premium Finance Company

Southern Transportation Finance, Inc.
211 S State College Boulevard, Anaheim
Opened: 7/31/23

Acquisition of Control

Golden Oak Cooperative Corporation, to acquire control of Birch Financial Inc.
Filed: 7/27/23

Foreign (Other Nation) Bank Activity

New Office

Credit Agricole Corporate and Investment Bank
2420 Sand Hill Road, Menlo Park (Representative Office)
Opened: 7/05/23

Royal Bank of Canada
2 Embarcadero Center, San Francisco (Representative Office)
Filed: 7/26/23

Foreign (Other State) Bank Activity

Northpointe Bank
1020 E Perrin, Fresno (Insured facility)
Opened: 1/01/23

CLOTHILDE V. HEWLETT Commissioner, Department of Financial Protection and Innovation

The August 2023 Monthly Bulletin covers the month ended  July 31, 2023.

It is issued pursuant to Financial Code section 376.

The Monthly Bulletin is available at no charge via e-mail.

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Last updated: Sep 26, 2023 @ 11:51 am