#AML – Federal Financial Analytics

6 03, 2023

DAILY030623

Eliza Allen2023-03-06T16:54:30-05:00March 6th, 2023|2- Daily Briefing|

GOP Revs Up Fight Vs. Big-Bank Capital Hikes

Firing a fusillade ahead of capital rewrites expected late this month, Senate Banking Republicans late Friday sent FRB Chairman Powell a letter arguing strongly against capital increases and laying out a strong view that the agencies are required by law to tailor key standards.

BIS Project Finds Retail-CBDC Cross-Border Benefits

In a project boosting retail CBDC, the BIS Innovation Hub today announced the results of Project Icebreaker, a cross-border retail CBDC pilot between Sweden, Norway, and Israel.

GOP Will Deploy IGs To Demand Fed, CFPB, SEC Reform

In addition to a hearing that morning with Chairman Powell, the full HFSC will call federal banking agencies on the carpet Wednesday for “wasteful” spending and other governance issues.

Dems Beg Gensler Not to Scrap Scope 3 Climate Disclosures

Responding to intense GOP opposition to the SEC’s climate disclosure proposal, fifty Congressional Democrats led by Sen. Warren (D-MA) sent a letter to SEC Chairman Gensler today urging him not to scale the proposal back, especially its Scope 3 provisions.

Treasury Wants Fast NBFI, OEF, Crypto Standards

Treasury International Affairs Under-Secretary Jay Shambaugh today outlined U.S. priorities, emphasizing not only the importance of containing Russia and countering new threats, but also quickly advancing numerous global initiatives.

Hsu Pushes To Start The End Game

Acting Comptroller Hsu today reiterated his determination to act as quickly as possible on Basel’s end-game rules, noting the interagency statement last year that this would soon be done without providing …

3 03, 2023

DAILY030323

Eliza Allen2023-03-03T17:07:43-05:00March 3rd, 2023|2- Daily Briefing|

Senate Dems Demand Bank, Service-Provider Regulation of EWS

Regardless of recent bank changes to Zelle policy, Senate Banking Democrats yesterday sent a letter to the heads of the banking agencies urging them to examine the customer reimbursement and AML practices of banks using Zelle and for the Fed and OCC also to monitor Early Warning Services (EWS).

SEC Custody Bulletin Under Renewed Attack

Senate Banking Member Lummis (R-WY) and HFSC Chairman McHenry (R-NC) late yesterday sent a letter to top banking regulators taking serious issue with an SEC accounting bulletin requiring custodians to recognize digital assets on their balance sheets.

Biden Backs CFPB Late-Fee Proposal

President Biden today reiterated his commitment to targeting “junk fees” in a proclamation announcing this week as National Consumer Protection Week. The statement highlights overdraft fees as unfair and endorses the CFPB’s NPR (see FSM Report CREDITCARD36) cutting credit card late fees to $8.

Daily030323.pdf…

2 03, 2023

DAILY030223

Eliza Allen2023-03-03T17:11:19-05:00March 2nd, 2023|2- Daily Briefing|

Senate GOP Reiterates Anti-Woke Demands

At the same time as the Senate passed a resolution overturning the Labor Department’s rule authorizing pension ESG investments, Sens. Rubio (R-FL), Cruz (R-TX), Cramer (R-ND), Cotton (R-AR), Blackburn (TN), and Scott (R-FL) reintroduced legislation (S. 583) to permit the FDIC to terminate the insured status of depository institutions refusing to provide services to Federal contractors.

HFSC GOP Reams CFPB Late-Fee Proposal

Seventeen HFSC Republicans sent a letter late yesterday to CFPB Director Chopra strongly protesting the Bureau’s recent NPR targeting credit card late fees (see FSM Report CREDITCARD36).

Gensler Boosts SEC Custody Rewrite

SEC Chairman Gensler today reiterated and emphasized his strong support for the agency’s proposal to rewrite the rules governing custody services (see FSM Report CUSTODY5), arguing that they would strengthen safeguards and provide a much-needed expansion to the protections qualified custodians provide.

Bipartisan Senators Target Another Crypto Culprit

Following Sen. Warren’s (D-MA) pledge to introduce bipartisan legislation extending AML protections to crypto firms (see Client Report CRYPTO39), Sens. Warren, Van Hollen (D-MD), and Marshall (R-KS) sent letters yesterday to the leadership of the crypto platform Binance, alleging that the company built an intentionally opaque corporate structure to circumvent securities and AML laws and facilitate money laundering and sanctions evasion.

Brown Demands Branch-Closure Hearings, Merger Policy

In the midst of what may well be negotiations over the nomination of Michael Hsu as Comptroller and continuing controversies over big-bank mergers, Senate Banking Chairman Brown (D-OH) today wrote …

28 02, 2023

FedFin on: Senate Banking Questions Sanctions Regime, Vows Stronger Prohibitions

Arezou Rafikian2023-02-28T16:31:06-05:00February 28th, 2023|The Vault|

In a remarkably bipartisan session, the Senate Banking Committee today made it clear that Congress wants tougher sanctions against Russia, near-term action against hold-out nations to oil-price caps and other efforts, and perhaps even confiscation of Russian assets to fund U.S. Ukraine aid. The panel was also united on the need to swiftly punish China should relations deteriorate. Several bills likely soon to advance were discussed, including soon-to-be-reintroduced Warren-Marshall legislation to extend AML and sanctions standards more effectively to cryptoassets and Rounds-Tester legislation (S. 168) to bar persons from sanctioned nations from purchasing agricultural property….

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

28 02, 2023

SANCTION20

William Cross2023-02-28T15:48:31-05:00February 28th, 2023|5- Client Report|

Senate Banking Questions Sanctions Regime, Vows Stronger Prohibitions

In a remarkably bipartisan session, the Senate Banking Committee today made it clear that Congress wants tougher sanctions against Russia, near-term action against hold-out nations to oil-price caps and other efforts, and perhaps even confiscation of Russian assets to fund U.S. Ukraine aid. The panel was also united on the need to swiftly punish China should relations deteriorate. Several bills likely soon to advance were discussed, including soon-to-be-reintroduced Warren-Marshall legislation to extend AML and sanctions standards more effectively to cryptoassets and Rounds-Tester legislation (S. 168) to bar persons from sanctioned nations from purchasing agricultural property. Discussion was clear on Daines legislation (S. 536) related to asset confiscation, a proposal that in the past has sparked Administration concern due to sovereign-immunity and global financial-stability considerations. As this report notes, the session also assessed sanctions effectiveness, with the consensus seeming to center on Senate views that sanctions have worked to some extent but may need to be strengthened. Republicans were particularly emphatic on the latter point.

SANCTION20.pdf…

24 02, 2023

FedFin on: Custody Reform

Arezou Rafikian2023-02-24T16:53:29-05:00February 24th, 2023|The Vault|

Making full use of powers granted in the 2010 Dodd-Frank Act, the SEC is proposing a wholesale rewrite of the rules dictating how investment advisers must place assets in custody and which institutions are considered qualified for this purpose. Although the proposal was sparked first by controversies surrounding custody for cryptoassets and then by significant investment losses, the NPR reaches most assets held in the direct or indirect possession of investment advisers or to which the adviser may gain possession, also redefining qualified custodians to exclude not only most crypto platforms, but also foreign firms and other entities the Commission believes do not ensure sufficient safeguards protecting investor assets in the event of the adviser’s malfeasance, insolvency, or operational failure….

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

24 02, 2023

CUSTODY5

Eliza Allen2023-02-24T11:15:03-05:00February 24th, 2023|1- Financial Services Management|

Custody Reform

Making full use of powers granted in the 2010 Dodd-Frank Act, the SEC is proposing a wholesale rewrite of the rules dictating how investment advisers must place assets in custody and which institutions are considered qualified for this purpose. Although the proposal was sparked first by controversies surrounding custody for cryptoassets and then by significant investment losses, the NPR reaches most assets held in the direct or indirect possession of investment advisers or to which the adviser may gain possession, also redefining qualified custodians to exclude not only most crypto platforms, but also foreign firms and other entities the Commission believes do not ensure sufficient safeguards protecting investor assets in the event of the adviser’s malfeasance, insolvency, or operational failure. Many of the proposal’s new requirements – e.g., control over beneficial-ownership changes, strict segregation – are already followed by those bank custodians with fiduciary obligations due to their own protocols and regulatory requirements, perhaps giving banks a head-up complying with new standards. However, the new standards may be problematic for at least some custody banks – the SEC wants them to resume fiduciary obligations and does not appear wholly satisfied with bank rules governing qualified custodians.

CUSTODY5.pdf…

23 02, 2023

DAILY022323

Eliza Allen2023-02-23T16:48:42-05:00February 23rd, 2023|2- Daily Briefing|

Agencies Strengthen Defenses vs. Crypto-Related Funding

As FedFin forecast when significant bank crypto-related deposit exposures came to light (see Client Report CRYPTO38), the banking agencies today issued guidance telling banks to monitor and mitigate risks related to resulting liquidity risk.

FSB Sets Out Key Cross-Border Payments Action Items

The Financial Stability Board today released a list of actions for implementing the G20’s Roadmap for Enhancing Cross-border Payments, including three priorities. These are payment system interoperability and extension; legal, regulatory and supervisory finalizing frameworks; and cross-border data exchange and message standards.

IMF Presses CBDC, New “Unified Ledger”

A new IMF blog post advocates for public sector implementation of new payment technologies including tokenization, encryption, and programmability to improve cross-border payments, limit counterparty risk, and facilitate AML and other compliance.

FHFA Proposes GSE-Capital Revamp

FHFA today sought comment on several significant revisions to the regulatory-capital rules governing Fannie and Freddie. As we will detail in a forthcoming in-depth report, several of these changes concede to comments rejected as the current rules were finalized.

Daily022323.pdf…

17 02, 2023

Al022023

Eliza Allen2023-02-17T12:18:34-05:00February 17th, 2023|3- This Week|

Will Any Crypto Be Left For Congress?

Although media last week seems suddenly to have discovered that banking is getting a divorce from cryptoassets, FedFin noted the inevitability of a parting following our analysis of the Fed’s crypto standards (see FSM Report CRYPTO31), the inter-agency statement reaffirming it, and Basel’s tough stand on crypto-related capital requirements (see FSM Report CRYPTO37). Many in the cryptoverse have demanded that the SEC stop de facto regulation via tough enforcement actions, but they may well think differently when they look at the agency’s new proposal for crypto-related custody. As we noted last week, this proposal has broad implications for custodian banks and the investment advisers who need them, but its stringent new standards could be so toxic to cryptoassets as to reconfigure them into the tokenized versions of fiat-currency obligations to which the banking agencies and the SEC are far more friendly.

Al022023.pdf…

17 02, 2023

DAILY021723

Eliza Allen2023-02-17T12:16:37-05:00February 17th, 2023|2- Daily Briefing|

Senate Dems Frame FRB-Nomination Demands

In conjunction with a bill spearheaded by Sen. Jack Reed (D-RI), Banking Chairman Brown (D-OH) joined other Democrats yesterday in introducing S. 496, legislation to require that the Federal Reserve Board have a governor dedicated to worker interests much as the seat now held by Gov. Bowman is by law required to focus on community-bank considerations. The measure was also introduced in the last Congress and was then as now intended more to send a signal to the White House about the candidates Senate Banking will view with the greatest favor rather than as a serious effort to change the law.

Swiss Bank Role In SEC Crypto Action Sure To Hike Pressure On Banking Agencies

We draw to your attention the reference to a Swiss bank in the SEC’s enforcement order against Terraform Labs and its founder, Do Kwon. Although criticized today by Republicans as an example of the SEC’s prior regulatory failures, the order itself is unsurprising given that Mr. Kwon is a fugitive and the algorithmic stablecoin’s collapse shocked previously complacent crypto markets and regulators. The SEC’s order says only that $100 million was illegally transferred into a “Swiss bank,” not naming the institution.

Daily021723.pdf…