Financial Services Update
December 10, 2014
HIGHLIGHTS
Federal Regulatory Developments
FFIEC Releases Revised BSA/AML Examination Manual
FFIEC Releases New HMDA/CRA Geocoding System
Litigation Developments
Pending Litigation Not Necessary To Invoke Common Interest Privilege
SUMMARIES
Federal Regulatory Developments
FFIEC Releases Revised BSA/AML Examination Manual
On December 2, 2014, the Federal Financial Institutions Examination Council (FFIEC)
announced the release of its revised Bank Secrecy Act/Anti-Money Laundering
(BSA/AML) Examination Manual. The revisions incorporate feedback from the banking
industry and examination staff and incorporate regulatory changes since the manual’s
2010 update. FinCEN and OFAC also collaborated on the revisions made to the
sections that address compliance with the regulations and sanctions programs that
FinCEN and OFAC administer and enforce.
To the extent that there were significant additions or modifications made to the manual
since its last update, such revisions are identified in the table of contents with a “2014”
designation. These sections include overviews regarding: (i) suspicious activity
reporting; (ii) currency transaction reporting and exemptions; (iii) foreign correspondent
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account recordkeeping, reporting, and due diligence; (iv) foreign bank and financial
accounts reporting; (v) international transportation of currency or monetary instruments
reporting; (vi) OFAC; (vii) foreign correspondent accounts; (viii) bulk shipments of
currency; (ix) automated clearing house transactions; (x) prepaid access; (xi) third-party
payment processors; and (xii) nonbank financial institutions. Updates also were made
to several appendices in the manual.
The FFIEC’s Examination Manual provides valuable guidance regarding compliance
with BSA/AML rules generally. The revised manual is available on the FFIEC BSA/AML
InfoBase at: http://www.ffiec.gov/bsa_aml_infobase/default.htm. The related FFIEC
press release can be found at: http://www.ffiec.gov/press/pr120214.htm.
FFIEC Releases New HMDA/CRA Geocoding System
On December 1, 2014, the Federal Financial Institutions Examination Council (FFIEC)
released a new version of the HMDA and CRA Geocoding System that provides
enhanced mapping features and more precise geocoding information. The FFIEC
Geocoding/Mapping system helps financial institutions identify and collect certain
information required to be reported under HMDA. Geocoding information includes the
metropolitan statistical area (MSA) or metropolitan division (MD), state, county, and
census tract information for the property. Geocoding information generally must be
collected and reported for mortgage loans subject to HMDA reporting. The
Geocoding/Mapping system allows entities to enter a street address to determine the
corresponding geocoding information. The system also provides demographic
information about a particular census tract, including income, population, and housing
data.
The FFIEC HMDA and CRA Geocoding System can be found at:
https://geomap.ffiec.gov/FFIECGeocMap/GeocodeMap1.aspx.
Litigation Developments
Pending Litigation Not Necessary To Invoke Common Interest Privilege
A New York appeals court recently held that pending or reasonably anticipated litigation
is not required to protect third party communications under the common-interest
privilege. The common interest privilege is an exception to the general rule that the
presence of a third party destroys the confidentiality of an attorney-client
communication. The common interest privilege protects communications shared among
parties with “nearly identical legal interest,” but historically in New York and some other
states, this privilege only applied when the communications are made under the specter
of “pending or reasonably anticipated litigation.”
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In Ambac Assurance Corp. v. Countrywide Home Loans, Inc., Ambac filed a motion to
compel production of communications made in 2008 about the merger of subsidiaries of
Bank of America Corporation (“BAC”) and Countrywide Financial Corporation. Ambac
asserted that these communications were relevant to its claims for being fraudulently
induced into insuring certain residential mortgage backed securities. In June 2013, the
referee supervising discovery granted Ambac's motion to compel BAC to produce the
2008 merger communications, concluding that “the common interest rule . . . does not
apply unless the parties share a common legal interest that impacts potential litigation
involving all parties . . .[T]o hold otherwise would be inconsistent with the narrow scope
of the attorney-client privilege.”
In a well-reasoned opinion, a five judge panel for the intermediate New York Supreme
Court Appellate Division departed from New York’s historically narrow interpretation of
the common interest privilege, which required the presence or threat of litigation. The
appellate court explained: “[in] today's business environment, pending or reasonably
anticipated litigation is not a necessary element of the common-interest privilege. . .
[because] business entities often have important legal interests to protect even without
the looming specter of litigation.”
The Ambac court relied heavily on the public policy underlying the attorney-client
privilege, the purpose of which is to encourage “full and frank communication between
attorneys and their clients and thereby promote broader public interests in the
observance of law and administration of justice.” (citing Upjohn Co. v United States).
The court explained that the “pending litigation” requirement developed from cases
addressing criminal law, and that continuing the requirement in the civil context would
make “make poor legal as well as poor business policy.” According to the panel,
entities with a shared legal interest, like the parties in merger discussions, should not be
discouraged from sharing legal advice from counsel in order to navigate the complex
legal and regulatory process involved in completing business transactions.
Although the opinion is limited to the jurisdiction of the First Judicial Department of New
York, it is notable for its measured analysis and pragmatic treatment of the common
interest privilege in the corporate transactional context. Other New York courts should
find the opinion persuasive.
Weiner Brodsky Kider regularly represents mortgage lenders and servicers throughout
the United States, for matters involving claims for alleged violations of federal and state
laws.
This Financial Services Update is for general information purposes only and is not in any way intended,
nor shall it be construed, as legal advice, legal opinion or any other advice on any specific facts or
circumstances. No person or entity (“Person”) should act or refrain from acting upon this information
without seeking professional advice. No Person may rely on this information or its applicability to any
specific circumstances. The information in this Financial Services Update is in no instance to be taken as
an indication of completeness, applicability to a particular situation, or an indication of future
developments or results.
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