Ally TARP Exit, IRS ID-Theft Battles, HSBC: Compliance

The U.S. Treasury and the watchdog
for its bailout program are sparring over whether the department
has an adequate exit plan for auto lender Ally Financial Inc. (ALLY)

“While Treasury has noted that it has several options for
possible divestment, including a public or private sale of stock
or other sale of Ally assets, Treasury has not decided which of
these exit paths to take,” the special inspector general for
the Troubled Asset Relief Program said in a report yesterday.
“It is essential that when the government finally exits Ally
that it do so forever.”

Timothy Massad, the Treasury’s assistant secretary for
financial stability, said in a letter to the inspector general
released Jan. 29 that the exit plan involves “two strategic
initiatives” — the reorganization of Residential Capital LLC,
the bankrupt mortgage company owned by Ally, and the sale of
Ally’s international operations.

Detroit-based Ally, which received a $17.2 billion bailout,
is 74 percent owned by the U.S. government. The special
inspector general report said Ally still owes U.S. taxpayers
$14.6 billion.

The debate over Ally is the latest in a series of spats
between the Treasury and the special inspector general, or
SIGTARP, the oversight body created as part of the TARP
bailouts. In a Jan. 28 report, the SIGTARP criticized the
Treasury for failing “to rein in excessive pay” at bailed-out
companies. The quarterly report released yesterday also showed
that the special inspector general’s office is still growing as
the bailout program winds down.

“Ally is highly confident in its ability to repay the
remaining U.S. Treasury investment in full,” Ally spokeswoman
Gina Proia said in an e-mailed statement. “We have taken a
number of steps in 2012 designed to best position the company to
exit TARP, and there has been significant progress thus far.”

Compliance Action

Refunds Seen Postponed in IRS Quest to Stop ID Theft

Some taxpayers seeking a quick refund may have to wait
longer than usual this year as the Internal Revenue Service
tries to stop criminals who steal others’ identities and file
fraudulent returns.

The agency, which begins accepting 2012 returns today, is
making its automated system more sensitive to signs of potential
fraud, meaning some returns will get a closer look. Last year,
the IRS prevented $20 billion in fraudulent refunds from being
issued, up from $14 billion the previous year.

The tax agency’s efforts to combat identity theft reflect
the tension in the IRS’s multiple missions, said Benson
Goldstein, a senior technical manager at the American Institute
of Certified Public Accountants in Washington.

The IRS has been trying to shorten processing times to
accelerate refunds, in part to encourage electronic filing and
in part to reduce taxpayers’ reliance on short-term loans. The
speed of refunds presented an opportunity for fraud.

The IRS expects to meet its goal of delivering 90 percent
of refunds within 21 days, Michelle Eldridge, a spokeswoman for
the agency, said in an interview Jan. 29. That compares with
months of waiting for taxpayers who are victims of identity

Taxpayer identity theft has become more prevalent in the
past few years. For fiscal 2012, the IRS’s identity-theft unit
received about 450,000 cases, up 78 percent over the previous
year, according to the National Taxpayer Advocate, an
independent organization within the agency.

For more, click here.

Bank Rossii to Introduce Basel III Capital Requirements in April

Basel III capital and capital adequacy requirements are to
start April 1, Alexey Lobanov, deputy director of the Bank
Regulation Department at Russia’s Central Bank said yesterday by

“Prudential supervision” is seen beginning Oct. 1,
Lobanov said.

New rules require a core Tier I capital ratio of 5.6
percent, a Tier I capital ratio of 7.5 percent, and a total
capital adequacy ratio of 10 percent, which is already in
effect, Lobanov said.

Basel III financial rules are to be introduced gradually.
By 2019, Basel III will require 4.5 percent minimum equity
capital, 6 percent minimum Tier-1 capital, and 2.5 percent
capital conservation buffer.


Unemployed U.K. Man Made $1 Million With Insider Tips, FSA Says

An unemployed British man made 692,644 pounds ($1.09
million) spread-betting with inside tips he received about
upcoming mergers, a lawyer for the U.K. Financial Services
Authority said.

Richard Joseph, 43, traded on information he received from
Ersin Mustafa, who worked in the print room at JPMorgan Chase
Co. (JPM)
’s Cazenove unit, FSA lawyer Michael Bowes told a jury
yesterday, the first of Joseph’s London criminal court trial.

Joseph, unemployed since the summer of 2000, was charged
with conspiring to trade on shares of Abbot Group Ltd., Fiberweb
Plc (FWEB)
, IMI Plc, Expro International Group Plc, Greene King Plc and
Aero Inventory Plc, based on the tips from Mustafa between
September 2007 and July 2008.

Joseph made payments of more than 268,000 pounds to
Mustafa, who also passed on tips from his brother, Ali, who
worked at the UBS AG print room, prosecutors said.

Joseph pleaded not guilty to six charges of conspiracy to
commit insider trading and will provide his defense later in the

Mustafa has fled the U.K., Bowes said.

Tradition Agrees to Pay $250,000 to Settle Bond-Rig Suit

Tradition (North America) Inc., a unit of Paris-based
broker Viel Cie. (VIL), agreed to settle allegations that it rigged
bids for municipal bond reinvestment deals, according to
officials in Massachusetts.

In a civil settlement, the broker agreed to pay $250,000 as
well as submit to a probe of whether the firm owes any
additional money, according to the state attorney general’s

The state alleged that Tradition, which conducted bidding
processes among financial institutions for reinvestment deals,
allowed certain companies to win the business at below-market
rates. Tradition worked for the state between 2000 and 2004 and
was supposed to get the highest interest rates from banks on
investments of municipal bond proceeds, according to the
attorney general’s office.

Representatives for Tradition in New York and Paris didn’t
immediately respond to requests for comment.

The case is Commonwealth of Massachusetts v. Tradition
Inc., 2010-04378, Massachusetts Superior Court (Suffolk County).


O’Malia Says U.S. Must Recoup All Peregrine Funds

Scott O’Malia, a Republican commissioner on the Commodity
Futures Trading Commission, talked about the latest developments
in the case of bankrupt commodities broker Peregrine Financial
Group Inc., and the importance of technology in market

O’Malia, speaking with Stephanie Ruhle on Bloomberg
Television’s “Market Makers,” also discussed staff changes at
the CFTC.

For the video, click here.

Mursi Says Egypt Will Uphold Security of Foreign Investments

Egypt’s President Mohamed Mursi said his government seeks
foreign direct investment and will uphold the legal security
that is a pre-condition for attracting investors.

Mursi made his comments at a German-Egyptian trade
conference in Berlin.

Comings and Goings

HSBC Hires Tax, Anti-Terror Chiefs to Bolster Controls Team

HSBC Holdings Plc (HSBA) appointed former U.S. Deputy Attorney
General James Comey and ex-U.K. tax chief Dave Hartnett to a
panel to combat financial crime after the bank paid $1.92
billion to settle money-laundering probes.

Comey, who will be a non-executive director at HSBC, joins
Bill Hughes, 62, ex-head of the Britain’s Serious Organised
Crime Agency; Juan Zarate, a former George W. Bush
administration counter-terrorism adviser, and former U.K.
diplomat Nick Fishwick, 54, in providing advice, London-based
HSBC said in a statement yesterday.

Chief Executive Officer Stuart Gulliver’s attempts to
reduce costs and improve profitability have been hurt by U.S.
probes and by compensation claims from U.K. clients. A Senate
committee said in July that lax oversight by top HSBC executives
gave terrorists and drug cartels access to the U.S. financial
system. The December settlement by Europe’s biggest bank by
market value to end investigations into money laundering is the
largest of its type reached in the U.S.

The HSBC committee will provide guidance on anti-money
laundering systems and controls, tax transparency, preventing
terrorist financing and drug financing, the bank said.

For more, click here.

OCC’s Head of Supervision for Largest U.S. Banks Leaves Position

Michael L. Brosnan has stepped down as chief of large bank
oversight at the U.S. Office of the Comptroller of the Currency
in a request that took the agency head by surprise.

Brosnan requested reassignment at the agency after
supervising large banks since the 2008 credit crisis, according
to an OCC statement released yesterday. Martin Pfinsgraff will
take over as acting senior deputy comptroller for large bank
supervision. Pfinsgraff, a former treasurer at a unit of
Prudential Financial Inc. (PRU) who has been the OCC’s deputy
comptroller for credit and market risk, will assume the new role
next month, according to the statement.

Brosnan has accepted a position as examiner-in-charge for
the national bank of Salt Lake City, Utah-based Zions
Bancorporation (ZION)
, according to the statement. He spent more than
21 years at the OCC before leaving in 2004 to join MBNA Corp.,
which was acquired in 2006 by Bank of America Corp.

Darrin Benhart, one of two deputy comptrollers running the
Credit and Market Risk Group, will temporarily take over the
entire group.

To contact the reporter on this story:
Carla Main in New Jersey at

To contact the editor responsible for this report:
Michael Hytha at

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