1. Woman Pleads Guilty to $2.6 Million Commodity Futures Trading Scheme / DOJ
On December 13, 2022, A Southern California woman pleaded guilty to her involvement in an investment fraud scheme that caused more than $2.6 million in losses to investors.
According to court documents, Sharief Deona McDowell, 57, of Loma Linda, defrauded at least 28 investors by falsely representing that she would invest their money in commodity futures and options contracts. In actuality, McDowell did not trade with the investors’ money and instead misappropriated the funds for her personal use. McDowell also provided investors with fabricated trade confirmations and account statements to falsely indicate that their investments were generating returns. In addition, McDowell used money provided by new investors to repay earlier investors – a tactic often used to conceal and prolong Ponzi and other investment fraud schemes. McDowell had a history of defrauding investors and committed this fraud in violation of a prior judicial order
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2. CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts / CFBP
On December 14, 2022, the Consumer Financial Protection Bureau (“CFPB”) ordered Wells Fargo Bank to pay more than $2 billion in redress to consumers and a $1.7 billion civil penalty for legal violations across several of its largest product lines. The bank’s illegal conduct led to billions of dollars in financial harm to its customers and, for thousands of customers, the loss of their vehicles and homes. Consumers were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed, and had payments to auto and mortgage loans misapplied by the bank. Wells Fargo also charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts. Under the terms of the order, Wells Fargo will pay redress to the over 16 million affected consumer accounts, and pay a $1.7 billion fine, which will go to the CFPB’s Civil Penalty Fund, where it will be used to provide relief to victims of consumer financial law violations.
According to the enforcement action, Wells Fargo harmed millions of consumers over a period of several years, with violations across many of the bank’s largest product lines. The CFPB’s specific findings include that Wells Fargo:
[1] Unlawfully repossessed vehicles and bungled borrower accounts;
[2] Improperly denied mortgage modifications;
[3] Illegally charged surprise overdraft fees;
[4] Unlawfully froze consumer accounts and mispresented fee waivers.
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3. SEC Charges Danske Bank with Fraud for Misleading Investors about Its Anti-Money Laundering Compliance Failures in Estonia / SEC
On December 13, 2022, The Securities and Exchange Commission (“SEC”) announced fraud charges against Danske Bank, a multinational financial services corporation headquartered in Denmark, for misleading investors about its anti-money laundering (AML) compliance program in its Estonian branch and failing to disclose the risks posed by the program’s significant deficiencies. Danske Bank agreed to pay $413 million to settle the SEC’s charges.
According to the SEC’s complaint, when Danske Bank acquired its Estonian branch in 2007, it knew or should have known that a substantial portion of the branch’s customers were engaging in transactions that had a high risk of involving money laundering; that its internal risk management procedures were inadequate to prevent such activity; and that its AML and Know-Your-Customer procedures were not being followed and did not comply with applicable laws and rules.
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4. FCA outlines stronger rules to protect consumers from rogue financial promotions / FCA
On December 6, 2022, The FCA has outlined new checks for those firms which want to approve financial promotions. The new measures will require firms to demonstrate they have the right expertise for the promotions they wish to approve.
Under current legislation, any FCA authorised firm is allowed to approve financial promotions on behalf of other firms who are not authorised by the regulator. Changes being introduced by Parliament will require authorised firms to undergo new screening checks before they are allowed to approve financial promotions, giving the FCA greater oversight to stop harm before it occurs.
Firms will also be required to regularly report back to the FCA on financial promotions they have approved, helping the FCA crack down on rogue adverts.
The proposed reforms will ensure the FCA can act quickly to put a stop to harmful financial promotions communicated by unauthorized firms, including in areas such as high-risk investments and Buy Now Pay Later.
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The Financial Regulation practice at Shibolet accompanies and assists many enterprises in the world of Fintech and Finances in regulatory and operational processes in Israel and around the world.
Financial Regulation Practice,
Shibolet & Co.
This update is provided as general information only and may not be relied upon in any individual case without additional legal advice.
