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The Bank Exams Tailored to Risk Process Promotes Risk-Focused Supervision of Community Banking Organizations, but Training Can Be Enhanced

The Board seeks to ensure that the institutions under its supervisory authority, including community banking organizations, operate in a safe and sound manner and comply with all applicable federal laws and regulations.

The Bank Exams Tailored to Risk process allows examination staff in the Federal Reserve Banks to tailor their supervisory activities, which promotes risk-focused supervision and effective resource allocation. Additional training will enhance their ability to use BETR to scope examinations and will increase the effectiveness of the BETR process. Management should also consider creating guidance on using BETR for institutions with unique business models or novel activities.

Our report contains two recommendations designed to enhance the effectiveness of the Board and Reserve Banks' BETR process.

The Board and the Reserve Banks Generally Met the Revised Timing Goals for Certain Fair Lending Matters

In January 2021, the Board implemented a revised review process for submitting and reviewing high-risk redlining matters to improve efficiency. Redlining is illegal discrimination that occurs when a lender provides unequal access to credit, or unequal terms of credit, because of the race, color, national origin, or other prohibited characteristics of the residents of the area where the prospective borrower resides, plans to reside, or seeks to obtain a mortgage on a residential property.

Among other things, we assessed the timeliness of the revised review process by analyzing data on the completion times for submitting and reviewing high-risk redlining matters. We found that the Board and Reserve Banks generally met their revised timing goals for submitting and reviewing high-risk redlining matters. Therefore, our report does not have any recommendations.

Washington Man Pleads Guilty to Extorting Clients Using Phony Escorts

ALEXANDRIA, Va. – A Washington man pled guilty today to using phony online escort profiles to extort hundreds of thousands of dollars from clients.

According to court documents, from at least August 2020 through October 2024, Abdul Kareem Kabba, 29, used photos and videos of women purchased from OnlyFans to create fake escort profiles on websites such as TheEroticReview.com. Kabba then would assume the identity of the "escort" and communicate with people interested in acquiring services. Kabba would typically ask them to send a deposit using peer-to-peer payment platforms or through websites that are commonly used by adult content creators to receive money. Kabba also would ask clients to verify their identities by sending a picture of themselves holding a form of identification such as a driver license and sending him a link to their social media profiles.

American Express Agrees to Pay $108.7M to Settle Allegations of Deceptive Marketing and "Dummy" Account Information

The American Express Company (American Express), based in New York, New York, has agreed to pay a $108.7 million civil penalty to resolve allegations that it violated the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) by deceptively marketing credit card and wire transfer products and by entering "dummy" Employer Identification Numbers in the credit card accounts of its affiliate bank.

California Couple Sentenced for Defrauding Paycheck Protection Program

HONOLULU – On January 9, 2025, Senior United States District Judge J. Michael Seabright sentenced Christopher A. Mazzei, 46, and Erin V. Mazzei, 43, both of Arroyo Grande, California, to 36 months and 27 months of imprisonment, respectively, for conspiracy to commit wire fraud and conspiracy to commit money laundering in connection with a scheme to defraud the government of forgivable Paycheck Protection Program (PPP) loan funds intended for Coronavirus-related relief. The Mazzeis pleaded guilty to two counts of an Indictment on August 28, 2024.