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August 2009 |
Schiff Hardin Product Regulatory Team Newsletter
On November 9, 2007, the Federal Trade Commission ("FTC") and several agencies that regulate banks, credit unions and other financial institutions issued final regulations (collectively referred to as the "Red Flag Rule"). By requiring "financial institutions" and "creditors" that maintain "covered accounts" to adopt and implement a written Identity Theft Prevention Program ("Program"), the Red Flag Rule aims to help detect, mitigate and prevent identity theft in connection with any "covered account." In its response to comments received after the rule was proposed, the FTC estimated that over 10 million entities would be subject to these regulations. The agencies were required to promulgate the Red Flag Rule under the FACT Act signed by President Bush on December 4, 2003. Although the initial compliance deadline was November 1, 2008, that deadline has been extended most recently to November 1, 2009. Requirements of Identity Theft Prevention Program The Program must be appropriate to the size and complexity of the financial institution or creditor and the nature and scope of its activities. The Red Flag Rule requires the Program to include reasonable policies and procedures to address the following matters:
Definitions "Financial institutions" and "creditors" with "covered accounts" are subject to the requirements of the Red Flag Rule. Accordingly, it must be determined whether the business is a "financial institution" or a "creditor," and whether the business has any "covered accounts." The term "financial institutions" includes state banks, national banks, state or federal savings and loan associations, mutual savings banks, state or federal credit unions, and any other person or entity that, directly or indirectly, holds accounts or deposits on which an individual consumer is permitted to make withdrawals by negotiable or transferable instrument, payment orders of withdrawal, telephone transfers and similar transactions for the purposes of making payments or transfers to third persons. "Creditor" means any business that regularly extends, renews or continues credit, or any person who regularly arranges for the extension, renewal or continuation of credit. This term also includes the assignee of an original creditor if the assignee participates in the decision to extend, renew or continue credit. The regulation and FTC guidance indicate that the definition of "creditor" includes banks, finance companies, automobile dealers, mortgage brokers, utility and telecommunication companies, hospitals, health care providers, lawyers and other businesses in which accounts are billed after services are rendered or goods are provided. "Covered account" means (i) an account offered or maintained primarily for personal, family or household purposes to permit multiple payments or transactions, and (ii) any other account offered or maintained by a creditor or financial institution for which there is a reasonable foreseeable risk to customers or to the financial institution (or other creditor) from identity theft. On May 22, 2009, President Obama signed The Fraud Enforcement and Recovery Act of 2009 ("FERA"). FERA significantly amends the Federal Civil False Claims Act, which is one of the government's main tools used to police and penalize wrongdoing in government contracting. Among other things, the Civil False Claims Act allows whistleblowers to keep up to 25 percent of any recovery against a contractor. The paragraphs below describe significant changes made by FERA to toughen the Civil False Claims Act.
On July 15, 2009, Taiwan became the 41st signatory to the World Trade Organization Agreement on Government Procurement. By signing this Agreement, Taiwan is required to adhere to a specified level of transparency in government contracting and to refrain from discriminating against products from the other signatory countries for purposes of certain government contracts. The U.S. Civilian Agency Acquisition Council and the U.S. Defense Acquisition Regulations Council (the "Councils") have as of August 11, 2009 jointly promulgated an interim rule amending the Federal Acquisition Regulations to add Taiwan to the list of designated countries for purposes of federal acquisition rules implementing the Agreement on Government Procurement. The Councils are accepting written comments regarding the interim rule until October 13, 2009. The result of this interim rule is that for most U.S. government contracts exceeding specified dollar values, Taiwanese products will be treated no differently from domestic products. DWPN Holdings (USA), Inc. — formerly known as DHL Express (USA), Inc. and DHL Holdings (USA), Inc. — was charged with numerous violations of United States export control laws by the Office of Foreign Assets Control ("OFAC") of the U.S. Treasury Department and the Bureau of Industry and Security ("BIS") of the U.S. Department of Commerce. In a settlement agreement approved on August 6, 2009, DWPN agreed to pay a penalty of $9.44 million and submit to annual audits of its export control compliance by an independent examiner through 2011. The publicly available settlement agreement indicates that although DWPN neither admits nor denies the allegations, the agencies had reason to believe that DWPN had committed the following export control violations:
ABOUT SCHIFF HARDIN LLP Schiff Hardin's multidisciplinary product regulatory team has extensive expertise in the domestic and international regulation of consumer and industrial products. We counsel clients on the requirements affecting all stages of a product's life cycle, including design, manufacturing, packaging, importing, exporting, distribution, sale, transportation, disposal and recycling. For more information, please feel free to contact us.
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