#AML – Federal Financial Analytics

10 04, 2024

DAILY041024

Eliza Allen2024-04-10T17:24:00-04:00April 10th, 2024|2- Daily Briefing|

OCC Merger Deadline Extended, De Facto Policy Remains

Responding to industry requests, the OCC today extended the comment deadline on its merger proposal (see FSM Report MERGER14) until June 15 from April 15.

Gruenberg Defends FDIC GSIB-Resolution Readiness

Rejecting criticism from its own inspector-general and others including Karen Petrou, FDIC Chair Gruenberg today stated that the agency is indeed ready to resolve a U.S. GSIB and that any such resolution will exert market discipline on shareholders and BHC counterparties.

Hsu Presses Banks to Expand Account Access for Immigrants

Focusing on increasing banking access for immigrants, Acting Comptroller Hsu today told banks to consider risk-based adjustments to their account screening processes to accept more forms of identification for account openings such as municipal IDs and consular ID cards.

Daily041024.pdf…

9 04, 2024

Daily040924

Arezou Rafikian2024-04-10T10:52:27-04:00April 9th, 2024|2- Daily Briefing|

Senate GOP Tackles Card Fees

Joined by GOP Senators from credit-card domiciles, Senate Banking Ranking Member Scott (R-SC) yesterday led the expected Republican resolution overturning the CFPB’s credit-card late fee rule (see FSM Report CREDITCARD37). It joins like-kind resolutions from Rep. Barr (R-KY) and Ogles (R-TN), with Mr. Barr’s resolution the one likely to move to the House floor.

Warren Starts Bargaining for Crypto-AML Standards

Throwing another wrinkle into the careworn face of efforts to pass stablecoin legislation, Sen. Warren (D-MA) yesterday sent a letter to Reps. McHenry (R-NC) and Waters (D-CA) arguing that their ongoing and apparently-hopeful efforts to craft stablecoin legislation may inadvertently amplify risk.

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9 04, 2024

AML137

Shane Smith2024-04-09T15:41:41-04:00April 9th, 2024|5- Client Report|

Senators Search for Digital-Asset AML Compromise

Today’s Senate Banking Committee Hearing with Deputy Secretary Adeyemo reviewed the Administration’s request for additional digital asset AML/CFT authority. Democrats were generally supportive of outlined statutory changes, citing various potential legislative solutions. Republicans focused their criticism on the Biden Administration’s efforts to sanction Iran, noting the growth of Iranian oil exports to China as a major avenue of sanction evasion. Although Ranking Member Scott (R-SC) called digital assets the “scapegoat” of this administration, Sens. Tillis (R-NC) and Hagerty (R-TN) floated a discussion draft of legislation to ensure that AML standards apply to centralized, consumer-facing digital asset financial institutions, calling this a good first step to ensuring the broader AML coverage sought in the Warren-Marshall bill (S.2669). Chairman Brown (D-OH) gave no indication of whether he is prepared to give the GOP’s approach consideration as he and others work to include a digital-asset AML bill in legislative vehicles. As noted earlier today, Sen. Warren (D-MA) made it clear that she has considerable problems with pending bipartisan House stablecoin legislation; we think compromise here is quite possible if something AML-related advances which Sen. Warren is willing to support. Surprisingly, Republicans did not use the hearing to press Treasury on SAR surveillance despite Sen. Scott’s letter raising serious concerns in this arena. Much of the hearing also addressed the committee’s bipartisan bill (S.1271) authorizing sanctions targeting fentanyl trafficking.

AML137.pdf…

5 04, 2024

Al040824

Shane Smith2024-04-05T16:26:55-04:00April 5th, 2024|3- This Week|

Crossing the AML Frontier

As the schedule below makes clear, Treasury Deputy Secretary Wally Adeyemo will bring his agency’s updated wish list before Senate Banking on Tuesday. The principal focus of the session is sure to be digital assets, with Treasury refining its prior plan to bring them fully within the AML/CFT enforcement scope not just to the greatest extent possible under current law, but also after key revisions. Democrats will be most receptive, with Sen. Warren (D-MA) using the session to propel her stalled bill to revise the law to bring what she calls cryptocurrency fully within it. This is a bipartisan bill, but we still expect many Republicans to complain that data does not support Treasury’s concerns in this sector. Republicans led by Ranking Member Scott (R-SC) are sure also to use the session to complain that big banks are using SARs to target January 6 protesters and others with whom they do not agree, alleging also that Treasury has pressed banks to do so for its own political purposes. Sen. Scott has sent a strongly-worded letter on this topic and it is a still more high-priority issue in the House. As always, an in-depth analysis will follow the hearing pointing to key actions and any changes to the challenging path ahead for the Warren-Marshall bill now that it was omitted from Majority Leader Schumer’s priority list.

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11 03, 2024

DAILY031124

Eliza Allen2024-03-11T17:15:23-04:00March 11th, 2024|2- Daily Briefing|

Hagerty Demands Signature-Asset Sale Answers ASAP

Sen. Bill Hagerty (R-TN) yesterday sent a letter to Chair Gruenberg questioning the FDIC’s adherence to requirements in its auction process during the sale of Signature Bank’s loan portfolio, accusing the FDIC of making political choices inconsistent with its least-cost mandate.

Scott Again Calls for Gruenberg Resignation

Adding to GOP pressure on FDIC Chair Gruenberg, Senate Banking Ranking Member Scott (R-SC) yesterday sent a letter reiterating his demand that Mr. Gruenberg step down.

BTFP Demise if FHLB Opportunity

As anticipated, the BTFP window closed today.

FDIC’s Hill Wants New Blockchain, Liquidity Standards

FDIC Vice Chair Hill today said there are “significant downsides” to the agency’s current approach to blockchain, describing its message and that of the inter-agency policy (see Client Report CRYPTO32) as “don’t bother trying.”

Warren Tries to Divide Powell from Other Regulators to Conquer Capital Regs

Following her grilling of Chair Powell last week regarding his decision to intervene in setting the new capital rules, Sen. Warren (D-MA) yesterday sent a letter to Vice Chair Barr, Chair Gruenberg, and Acting Comptroller Hsu asking them if pressure from big banks has “weakened your resolve.”

GAO Wants FinCEN to Move Better, Faster

Reinforcing longstanding bank complaints about the current AML regime, GAO today published a report finding that FinCEN needs to improve transparency surrounding its progress implementing the Anti-Money Laundering Act of 2020 (see FSM Report AML132).

Biden Presses for Statutory Change Boosting FHLB Affordable-Housing Contributions

President Biden’s FY25 …

29 02, 2024

DAILY022924

Eliza Allen2024-02-29T16:41:41-05:00February 29th, 2024|2- Daily Briefing|

FSB Says Swiss Standards, Not Its Own, Led to CS Chaos

The FSB today released the review of Swiss GSIB regulation announced after Credit Suisse’s failure.

Basel Tackles Private Credit, GSIB Window-Dressing

The Basel Committee today again pressed nations – clearly here focusing on the U.S. – to finalize the end-game rules as quickly as possible.

FinCEN Releases New AML/CFT Hit List

FinCEN today emphasized that the new FATF report has revised countries where strategic AML and CFT measures are deficient, warning U.S. banks to take this into account – i.e., to ensure appropriate de-risking.

CFPB Targets Bank Comparison-Shopping Posts

The CFPB today loosed another attack on bank marketing practices, arguing that key facts are omitted from credit-card and financial-product descriptions obscuring back-end fees.

Bipartisan HFSC Votes to Repeal SAB 121

At today’s abbreviated markup, HFSC took up H.J. Res. 109, which would repeal the SEC’s Staff Accounting Bulletin 121 requiring banks to keep custody cryptoassets on balance sheet (see FSM Report CUSTODY5).

HFSC Approves Secret Service Cybercrime Bill

As HFSC’s markup continued today, the committee turned to Rep. Fitzgerald’s (R-WI) bipartisan H.R. 7156 expanding Secret Service investigative authorities over cybercrime.

FSB Head Ratchets Up Stablecoin Systemic Worries

In remarks today, FSB Chair Klaas Knot discussed market developments in cryptoassets, suggesting that renewed market interest in stablecoins by bigtechs and financial institutions could have systemic implications.

Daily022924.pdf…

23 02, 2024

AL022624

Arezou Rafikian2024-02-23T16:40:22-05:00February 23rd, 2024|3- This Week|

Anniversary Party

March 10 is the one-year anniversary of Silicon Valley Bank’s costly failure, although one might better date the beginning of the end of regional-bank regulation as we knew it to March 8, the date Silvergate bit the digital dust. Congress has talked much of these failures ever since, but actually done nothing but chide the banking agencies from different sides of the political spectrum based on what Members think of the massive regulatory rewrite proposed in SVB’s wake and ongoing internal work at the banking agencies to improve woefully-inadequate supervision. We would add the value also of focusing on the FDIC’s inability to resolve troubled banks to the urgent to-do list, but Congress has yet to turn to it and so neither does the FDIC. Still, lack of action does not mean lack of talk. There will in fact be much, much talk about recent failures when Chair Powell comes to Congress next week and even, we expect, a bit of legislative action that just might change a little bit of banking law.

Al022624.pdf…

23 02, 2024

Daily022324

Arezou Rafikian2024-02-23T16:39:26-05:00February 23rd, 2024|2- Daily Briefing|

FDIC’s OIG: Agency Faces Severe Staffing, Resolution Challenges

The FDIC’s Office of the Inspector General (OIG) late yesterday issued an assessment of ongoing FDIC challenges. These only indirectly address the workplace-culture inquiry now gripping the agency and Congress, focusing principally on the extent to which the agency has made progress addressing the significant internal failings identified in its reports on Signature Bank’s failure (see Client Report REFORM222) and that of First Republic.

Progressive Dems Argue that De-Risking is Discriminatory

Late yesterday, Sens. Warren (D-MA) and Sanders (D-VT) alongside Reps. Omar (D-MN), Tlaib (D-MI), and Pressley (D-MA) sent letters to the heads of JP Morgan Chase, Wells Fargo, Bank of America, and Citibank criticizing the banks for what they describe as shutting down consumer accounts as part of AML de-risking practices. Calling this harmful to consumers and a threat to equitable access, Muslim-Americans and other minority communities are said to be disproportionately affected in violation of Treasury policy.

Basel Head Continues Capital-Reg Defense, Work on NBFI Standards

The head of the Basel Committee, Pablo Hernández de Cos, today reiterated his defense of the global capital rules, spending much of the talk arguing against those seeking to roll them back and those who consider bank capital “idle money.” The talk also emphasized the inter-connected risk to banks highlighted by new exploratory Fed stress tests (see Client Report STRESS32), Acting Comptroller Hsu’s speech earlier this week, and FSOC’s systemic methodology (see FSM Report SYSTEMIC98), noting …

22 02, 2024

DAILY022224

Eliza Allen2024-02-22T17:00:09-05:00February 22nd, 2024|2- Daily Briefing|

CapOne Deal Draws GOP Fire

Late yesterday, Sen. Josh Hawley (R-MO) joined Democrats in strongly opposing the CapOne/Discover merger, doing so not only via a short statement, but also a letter to Assistant AG Kanter.

CFPB Buttresses Calls to Block CapOne Deal

Adding still more heat to the fire it built Friday on credit-card industry practices, the CFPB today reported that the average APR margin for credit-cards has reached an all-time high. APR margins were also found also to account for about half of the absolute card rate, which rose from 12.9 percent in 2013 to 22.8 percent in 2023.

Hsu Presses Cross-Border Cryptoasset-Platform Regulation

Speaking before the FSB’s Crypto Working Group today, Acting Comptroller Hsu made it clear that multi-function cryptoasset intermediaries require a home/host-country regulatory construct akin to that adopted in the U.S. and around the world after BCCI’s money-laundering scandal and failure in 1991.

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14 02, 2024

DAILY021424

Eliza Allen2024-02-14T17:29:47-05:00February 14th, 2024|2- Daily Briefing|

Global Regulators Propose Ways to Limit Variation-Margining Stress

As promised, CPMI and IOSCO have issued a discussion paper on CCP and clearing-member variation-margin practices. The global agencies propose eight principles to enhance the likelihood that margins will be covered in stress situations, a continuing challenge based on a recent IMF paper finding that up to a third of EU active-derivatives users would not be able to meet variation-margin calls under stress and would thus turn to liquidating MMF shares or other assets in a manner likely to amplify market stress.

HFSC Deploys Power of the Purse to Pressure FinCEN

As anticipated, today’s HFSC hearing with Treasury and FinCEN was highly partisan, with Republicans continuing to blast FinCEN for what they call SAR surveillance and now threatening to block any increased funding for FinCEN until it also improves beneficial-ownership reporting to the GOP’s liking. Rep. Loudermilk (R-GA) also criticized FinCEN for failing to release the statutorily-mandated BSA review and the $10,000 threshold review.

Barr Sees Banking System as Strong, Liquid

In remarks today, FRB Vice Chair Barr emphasized that, despite pockets of risk and CRE worries, the banking system is sound and he sees no liquidity-risk concerns across the financial system. Still, March 2023 taught hard lessons, he said, with banks since taking significant steps to reduce HTM holdings and enhance liquidity resilience.

Daily021424.pdf…