#AI/ML – Federal Financial Analytics

31 10, 2023

FedFin Assessment: New White House AI Policy Promises New KYC Requirements, Banking-Agency Guidance

Arezou Rafikian2023-10-31T13:33:25-04:00October 31st, 2023|The Vault|

In this report, we assess the detailed executive order (EO) issued late Monday afternoon after days of private showings of selected versions. Much in the EO’s binding provisions address near-term AI-related threats to national-security, pandemic-risk, and infrastructure vulnerabilities and much related to AI-related opportunities derive from internal procedures Mr. Biden urges the federal government to develop along with workforce protections and biomedical research. The EO also reiterates the Administration’s values and presses agencies to work still harder on voluntary industry standards that many have been drafting or disagreeing on since the White House and Congress first called attention to AI risk. What comes of these provisions in the EO remains to be seen, but the Administration has also used tools such as the Defense Production Act’s authorization for direct economic intervention to mandate an array of new AI commercial and technology safeguards.

The full report is available to retainer clients. To find out how you can sign up for the service, click here and here.…

15 08, 2022

Karen Petrou: The Sobering Lesson of Subprime Mortgages for Digital-Asset Regulation

Arezou Rafikian2023-01-04T12:13:43-05:00August 15th, 2022|The Vault|

Last week, the American Banker had a synopsis of views filed on Treasury’s request for comments on digital-finance regulation. Its quote from the ABA’s comment letter is striking, indicating that this letter pointed to the increasingly-absurd reality of no rules for nonbanks and no digital assets for banks given all their rules. Progressive advocates pushed back, arguing that it’s right to keep banks quashed because of all the systemic hazards they pose. To my thinking, both sides are right, with recent history not just showing why, but also how urgent it is for regulators finally to act on both overarching crypto rules and those governing bank exposures in this volatile sector.

The recent history I have in mind is the chilling precedent of subprime mortgages starting in around 2003. I well remember a meeting at the OCC in which my late husband detailed both the borrower and market risks of new mortgage products such as those with “silent seconds” extended to borrowers with no demonstrable ability to repay even a first line from resources other than the ever-appreciating house prices investors somehow believed were a force of nature that always blew balmy winds their way.

The OCC official with whom we spoke was even more worried than we about emerging market trends, but she was over-ruled from on high. This was first because national banks weren’t sounding the alarm, second because no other banking agency seemed worried, and finally because anything that adversely affected national banks might have undermined …

6 01, 2022

Analysis of AML/CFT Regulatory Reform

Arezou Rafikian2023-04-25T15:45:12-04:00January 6th, 2022|The Vault|

As the banking industry has long hoped and Congress last year directed,1 FinCEN is beginning to develop a new policy framework prioritizing ways to make anti-money laundering (AML) and countering the financing of terrorism (CFT) regulation more risk-based. FinCEN is taking the opportunity of its request for information (RFI) also to seek views on ways to modernize AML/CFT standards, make them more efficient, ensure adherence to global protocols, and toughen rules where necessary to protect national security. Last year’s law required Treasury to enhance law enforcement and submit a report on AML/CFT….

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…

5 10, 2021

FedFin: Gensler: SEC Will Not Ban Crypto, Will Treat as Securities

Arezou Rafikian2023-06-28T15:31:17-04:00October 5th, 2021|The Vault|

As anticipated, today’s HFSC hearing with SEC Chair Gensler covered the full SEC agenda, although members steered clear of the SEC investigation demanded by Sen. Warren (D-MA) into recent Fed trading. Chair Gensler defended his budget request, citing for example a major increase in IPOs and saying the SEC is a “cop on the beat” ensuring investors are protected. Democrats pushed Mr. Gensler to take more action on crypto while Republicans argued crypto is not a security; Chair Gensler was consistent throughout the hearing in his belief that the law is clear on what is a security, but noted also it may be outdated in some areas and thus urged Congress to update the law if it sees appropriate. Like Fed Chair Powell (see Client Report REFORM209), Chair Gensler pledged he would not ban crypto.

The full report is available to retainer clients. To find out how you can sign up for the service, click here.…