#AML – Federal Financial Analytics

27 09, 2023

DAILY092723

Eliza Allen2023-09-27T16:36:21-04:00September 27th, 2023|2- Daily Briefing|

FinCEN Bows to BOI Pressure

Responding to bipartisan concerns, FinCEN today issued an NPR to extend the beneficial ownership information (BOI) report filing deadline from thirty to ninety days for companies created or registered in 2024.

Chopra Considering Refi, Point Rules

The CFPB today released its annual report on residential mortgage lending, finding that mortgage applications, originations, and affordability declined significantly in 2022 while costs, loan denials, HELOC originations, and the percentage of cash-out refinances all increased.

HFSC GOP Presses Gensler on Banking-Reg Cumulative Impact

During Chairman Gensler’s as-always contentious HFSC hearing today, Rep. Barr (R-KY) asked if the SEC is in consultation with the Federal Reserve regarding the combined CRE effects of recent SEC proposals and the Basel III endgame standards (see Client Report CAPITAL234).

Carstens Says Law Must Catch Up To CBDC

BIS General Manager Agustín Carstens today emphatically called for rapid development of clear CBDC legal frameworks based on defined rights and obligations for privacy, AML compliance, and user choice.

Daily092723.pdf…

7 09, 2023

DAILY090723

Eliza Allen2023-09-07T16:43:25-04:00September 7th, 2023|2- Daily Briefing|

FSB-IMF Report Lays Out Crypto-Policy Roadmap

The FSB and IMF today published a joint report synthesizing their policy and regulatory recommendations for cryptoassets, laying out a policy roadmap that breaks no new ground.

Senate Dems Try Again to End State Usury Ceilings

Senate Majority Whip Durbin (D-IL) yesterday introduced another effort (S. 2730) to impose a federal usury ceiling.

NGFS Warns Ecological Risk Could Be Systemic

The Network for Greening the Financial System (NGFS) today released a report on nature-related financial risk concluding that ecological risk transmission could cause contagion leading to systemic risk.

CFPB Soon to Advance Its Open-Banking Construct

CFPB Director Chopra today announced that the CFPB will be issuing proposed rules next month to reactivate its DFA consumer data rights powers (see FSM Report DATA3).

Global Securities Regulators Craft DeFi Standards

IOSCO today released a DeFi consultation report proposing nine policy recommendations intended to support heightened regulatory consistency and oversight.

Waters Presses Agencies to Change SSN Collection Requirements

HFSC Ranking Member Waters (D-CA) today wrote to the leadership of the banking agencies, Treasury, and FinCEN asking them to consider allowing financial institutions only to collect a SSN’s last four digits to minimize cybersecurity risks.

Fed Staff Suggest Solution to CBDC Privacy Problem

Addressing one of the biggest CBDC challenges in the U.S., Fed staff today published a report arguing that the use of privacy-enhancing technologies preserves digital asset user confidentiality while maintaining enough visibility for official audits in order to prevent illicit finance.

Daily090723.pdf…

5 09, 2023

DAILY090523

Eliza Allen2023-09-05T17:16:52-04:00September 5th, 2023|2- Daily Briefing|

FSB Considers Resolution Construct Revamp

In addition to calling for full and consistent implementation of the Basel III framework, the FSB head’s letter to the G20 today stresses that this year’s bank failures challenge long-held views about deposit stickiness and the speed of bank runs, leading international standard-setters now to consider unspecified policy changes to the resolution construct.

BIS Study: Fed, FDIC Reassurances Offset Bank Run Risk

Contributing to analysis of viral runs and how to stop them, a new paper from BIS staff concludes that public communication from the Fed on banking system stability and from the FDIC on deposit insurance during crises can mitigate systemwide run risk, while similar statements from political figures such as President Biden are less effective.

IMF: Money Laundering Undermines Financial Stability

The IMF yesterday published a blog post on money laundering’s financial-stability impact, concluding that cross-border illicit payments result in equity-price declines, higher CDS costs, elevated perceived credit risk, and declines in deposits for the individual banks involved. The blog also states that there is a contagion dynamic as a result of spillover effects between targeted banks and other banks within the region.

Daily090523.pdf…

4 08, 2023

DAILY080423

Eliza Allen2023-08-04T16:31:03-04:00August 4th, 2023|2- Daily Briefing|

Fed Study: GSIB Leverage Ratios No Cause of Treasury-Market Stress

As regulators prepare to extend the supplementary leverage ratio (SLR) to all large banks (see FSM Report CAPITAL230), a new Fed staff research note concludes that the higher leverage ratio did not undermine dealer-bank capacity.

Warren, Dems Use North Korea Case to Press Crypto AML/Sanctions Bill

Ahead of a hard push next month to add crypto AML and sanction standards to the defense authorization, Sens. Warren (D-MA), Van Hollen (D-MD), and Kaine (D-VA) sent a letter to Treasury Under Secretary for Terrorism and Financial Intelligence Nelson and National Security Advisor Sullivan calling on the Administration to crack down on North Korea’s illicit crypto activity.

Warren, Porter Demand Stricter FDIC Crackdown on Uninsured Deposit Underreporting

Following last week’s FDIC financial institutions letter highlighting that some banks incorrectly estimated uninsured deposits in their Call Reports, Sen. Warren (D-MA) and Rep. Porter (D-CA) late yesterday sent a letter to FDIC Chairman Gruenberg taking serious issue with the agency’s “feeble” response.

Daily080423.pdf…

19 07, 2023

DAILY071923

Eliza Allen2023-07-19T16:57:05-04:00July 19th, 2023|2- Daily Briefing|

FTC/DOJ Propose Sweeping M&A Rewrite

Following an extensive inquiry into a new U.S. merger construct, the Department of Justice and Federal Trade Commission today released a draft formal policy statement that would codify issues previously raised in areas such as a transaction’s implications for workers.

White House Leaves Bank “Junk Fee” Attack As Is

Acting on President Biden’s competition executive order (see Client Report MERGER6), the White House today announced a slate of actions aimed at lowering consumer costs and promoting competition.

Bipartisan Senators Introduce New DeFi-AML/Sanctions Framework

Senator Reed (D-RI) yesterday introduced legislation along with Sens. Warner (D-VA), Rounds (R-SD), and Romney (R-UT) targeting DeFi-related money laundering and sanctions evasion.

Dems Reintroduce Bill Requiring Instant Consumer Deposit Access

Sens. Van Hollen (D-MD) and Warren (D-MA) and Reps. Pressley (D-MA) and Lynch (D-MA) have reintroduced the Payments Modernization Act, which requires financial institutions to recognize deposited funds in real-time and clarifies the moot point of whether the Fed has existing authority to build a real-time payments system.

Daily071923.pdf…

17 07, 2023

DAILY071723

Eliza Allen2023-07-17T16:58:11-04:00July 17th, 2023|2- Daily Briefing|

HFSC to Tackle FinCen, Sanctions

The HFSC memo on the National Security Subcommittee’s Tuesday hearing makes it clear that Republicans have not wavered in their criticism of FinCEN’s beneficial-ownership standards (see FSM Report AML134). As before, the GOP’s principal concern is small-business burden, with bills to be considered including H.R. 4035 by Chair McHenry (R-NC) extending the small-business compliance deadline and a bill by Rep. Nunn (R-IA) to ensure at least a two-year compliance period.

Global Regulators Strengthen Crypto, Stablecoin Standards

The FSB today finalized its “same-activity/same-rule” standards for cryptoassets and stablecoins (see FSM Report CRYPTO34). We will soon provide clients with an in-depth analysis of the recommendations, which are effective immediately.

Gensler Sounds AI Systemic Alarm

In remarks today, SEC Chairman Gensler echoed his longstanding concern about predictive analytics and AI-related problems recently highlighted by CFPB Director Chopra and the banking agencies. He also cautions public issuers to ensure their AI-related disclosures are accurate, noting that AI-spawned market fraud is still fraud the SEC will vigorously pursue.

Daily071723.pdf…

13 07, 2023

DAILY071323

Eliza Allen2023-07-13T16:52:37-04:00July 13th, 2023|2- Daily Briefing|

FSB Sees Climate-Risk Disclosure, Analytical Progress

The FSB today released a progress report on its Roadmap for Addressing Climate-Related Financial Risks that updates work toward the four key goals identified in its 2021 Roadmap. Progress is evident via the International Sustainability Standards Board’s (ISSB) disclosure standards, with the FSB urging IOSCO quickly to endorse them.

New Lummis-Gillibrand Crypto Bill Faces Steep Odds

Sens. Lummis (R-WY) and Gillibrand (D-NY) yesterday introduced an updated version of their comprehensive crypto bill (see FSM Report CRYPTO28). Changes include increased consumer protection provisions, AML penalties, proof-of-reserves and asset segregation requirements, requirements for all cryptoassets – aside from truly decentralized ones – to register with the CFTC and requirements also for all payment stablecoins to be issued by financial institutions.

FTC Settlement May Signal Move into Crypto Regulation

Wading into crypto regulation, the FTC today reached a settlement with the crypto platform Celsius Network, permanently barring it from handling customer assets and charging three executives with misleading customers. It remains to be seen if the FTC expands its enforcement scope to other crypto entities under SEC scrutiny for investor-related risks, but a growing FTC presence in this sector could cast a formidable shadow given the CFPB’s more limited enforcement powers.

Daily071323.pdf…

27 04, 2023

DAILY042723

Eliza Allen2023-04-27T17:05:53-04:00April 27th, 2023|2- Daily Briefing|

House GOP Presses Entirely New Digital Asset Jurisdictional Framework

Before today’s HFSC Subcommittee session on digital asset regulatory gaps began, full committee Chairman McHenry (R-NC) and House Ag. Committee Chairman Thompson (R-PA) along with Reps. Hill (R-AR) and Johnson (R-AL) issued a joint statement emphasizing that inter-committee collaboration will characterize future legislative efforts and announcing that the committees will hold a joint hearing next month. Opening the hearing, Subcommittee Chairman Hill argued that Congress must act to resolve definitional and jurisdictional disagreements between the SEC and CFTC. He also called for a disclosure regime tailored to the specific needs of digital asset purchasers. Ranking Member Lynch (D-MA) sided with SEC Chairman Gensler’s views that most digital assets are securities and also defended the current regulatory regime.

Daily042723.pdf…

25 04, 2023

DAILY042523

Eliza Allen2023-04-25T17:12:43-04:00April 25th, 2023|2- Daily Briefing|

Stablecoin 2.0 Is Controversial 3.0

Ahead of Thursday’s stablecoin hearing, HFSC Republicans late yesterday released a second discussion draft of legislation that received a most equivocal response at last week’s subcommittee hearing (see Client Report CRYPTO42).

Treasury Finds Profitability to Blame for De-Risking

Treasury today released its 2023 De-Risking Report, finding that profitability principally explains why financial institutions choose to de-risk.

OFR: No Single Factor To Blame For 2019 Repo Spike

A new OFR paper on the September 2019 repo rate spike concludes that while a confluence of factors – large Treasury issuances, corporate tax deadlines, and lower levels of reserves – caused the crisis, none of them individually would have been disruptive enough to trigger the spike, although limited transparency and market segmentation exacerbated it.

Federal Agencies Launch New Anti-AI Enforcement Effort

The FTC, the Civil Rights Division of the DoJ, CFPB, and EEOC today released a joint statement pledging to enforce all relevant consumer protection, anti-discrimination, and fair competition laws not only on AI, but indeed also on all “automated systems” that the agencies believe to be within their jurisdictions.

HFSC Digital Assets Hearing Set For Jurisdictional Debate

Ahead of Thursday’s hearing on the latest stablecoin discussing draft, HFSC’s staff memo today reiterates GOP opposition to the SEC’s jurisdictional arguments.

ONRRP Revised

The Federal Reserve Bank of New York today revised the terms of access to the overnight reverse-repo program, adding financial stability and bank safety-and-soundness to monetary-policy implementation as ONRRP criteria for eligible counterparties …

6 04, 2023

DAILY040623

Eliza Allen2023-04-06T17:06:35-04:00April 6th, 2023|2- Daily Briefing|

Treasury Reiterates AML/CFT DeFi Concerns

Following on the President’s executive order (see Client Report CRYPTO26) and its own reports (see FSM Report CRYPTO30), Treasury today released its DeFi Risk Assessment, finding as prior reports have presaged that AML/CFT noncompliance is the sector’s primary vulnerability. Indeed, the analysis strongly states that firms must comply with these standards no matter their business model. It also highlights a regulatory gap where DeFi firms not classified as financial institutions under the BSA are exempt from stringent standards, suggesting both statutory and regulatory changes.

Daily040623.pdf…