CCM Enforcement Actions & Penalties 2 — Questions and Answers
Question 1: A consent order issued by a federal regulator differs from a cease-and-desist order primarily because a consent order:
- Requires immediate criminal prosecution
- Is agreed to voluntarily by the institution without admission of wrongdoing (Correct answer)
- Can only be issued after a formal adjudicatory hearing
- Carries mandatory minimum fines set by statute
Correct answer: Is agreed to voluntarily by the institution without admission of wrongdoing
A consent order is a negotiated settlement that the institution agrees to without admitting guilt, whereas a cease-and-desist order may be unilaterally imposed.
Question 2: Under the Bank Secrecy Act (BSA), which enforcement agency has primary authority to impose civil money penalties on non-bank financial institutions for BSA violations?
- Office of the Comptroller of the Currency (OCC)
- Financial Crimes Enforcement Network (FinCEN) (Correct answer)
- Federal Reserve Board (FRB)
- Consumer Financial Protection Bureau (CFPB)
Correct answer: Financial Crimes Enforcement Network (FinCEN)
FinCEN is the primary BSA regulator with authority to assess civil money penalties against non-bank financial institutions.
Question 3: Which factor is typically considered an aggravating circumstance when regulators calculate the severity of a civil money penalty?
- Voluntary self-disclosure before examination
- Prompt remediation and cooperation
- Concealment or lack of cooperation during the examination (Correct answer)
- First-time violation with no prior history
Correct answer: Concealment or lack of cooperation during the examination
Concealment or failure to cooperate with regulators is a classic aggravating factor that increases penalty severity.
Question 4: A 'Matter Requiring Attention' (MRA) issued after a bank examination is best described as:
- A formal enforcement action requiring court approval
- A supervisory finding that directs management to correct a deficiency (Correct answer)
- A criminal referral to the Department of Justice
- A public notice of regulatory noncompliance
Correct answer: A supervisory finding that directs management to correct a deficiency
An MRA is an informal supervisory tool directing a bank's management to address a specific deficiency, not a formal legal enforcement action.
Question 5: The False Claims Act's qui tam provision allows:
- Regulators to fast-track enforcement without a hearing
- Private citizens (relators) to file suit on behalf of the government and share in recovered damages (Correct answer)
- Agencies to impose treble damages without a court order
- Banks to appeal enforcement actions to an administrative law judge
Correct answer: Private citizens (relators) to file suit on behalf of the government and share in recovered damages
The qui tam provision empowers whistleblowers (relators) to sue on the government's behalf and receive a percentage of any recovery.
Question 6: Which of the following best describes a 'deferred prosecution agreement' (DPA) in a corporate compliance context?
- A court order permanently barring an individual from the industry
- A negotiated agreement where prosecution is suspended if the company meets specified conditions (Correct answer)
- An SEC order requiring disgorgement of ill-gotten gains
- A civil penalty assessed in lieu of criminal charges
Correct answer: A negotiated agreement where prosecution is suspended if the company meets specified conditions
A DPA suspends criminal prosecution in exchange for the company fulfilling conditions such as compliance reforms, cooperation, and penalty payments.
Question 7: When the CFPB uses its UDAP/UDAAP authority to take enforcement action, 'abusive' practices are distinguished from 'unfair' practices in that 'abusive' practices specifically target:
- Practices that cause substantial financial injury to consumers
- Consumer lack of understanding or inability to protect their own interests (Correct answer)
- Deceptive representations that mislead a reasonable consumer
- Violations of other federal consumer financial laws
Correct answer: Consumer lack of understanding or inability to protect their own interests
Abusive acts or practices under UDAAP exploit consumers' lack of understanding, unreasonable reliance, or inability to protect their interests.
CCM Enforcement Actions & Penalties 2
A consent order issued by a federal regulator differs from a cease-and-desist order primarily because a consent order: