#FinCEN

14 02, 2024

DAILY021424

2024-02-14T17:29:47-05:00February 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

13 02, 2024

DAILY021324

2024-02-13T17:42:19-05:00February 13th, 2024|2- Daily Briefing|

Durbin Tries Another Approach to Advance Card-Fee Limits

After trying various ways to bring his credit-card fee bill to the floor, Senate Judiciary Committee Chair and Majority Leader Durbin (D-IL) has scheduled a hearing on this controversial bipartisan measure (see FSM Report INTERCHANGE10).

FinCEN Reaches SEC Agreement to Bring Investment Advisers Under AML/CFT Standards

As it has repeatedly promised, FinCEN today revised a 2015 proposal and issued a new one to subject investment advisers to AML and CFT requirements similar to, but still less restrictive than, those that have long governed banks.

HFSC Rallies to Crypto AML/CFT Defense

The HFSC staff memo on Thursday’s Digital-Assets Subcommittee hearing makes it clear that cryptoasset entities will be given a strong platform from which to resist calls in the Senate to subject cryptoasset transactions to AML and sanctions law.

Gensler Reinforces AI Concerns

In remarks today, SEC Chair Gensler acknowledged AI’s benefits in a manner consistent with the President’s executive order (see Client Report AI3), but then launched into a sharp critique of its risks in line with the agency’s pending rule in this arena.

Bowman Takes Fed Accountability, Transparency to Task

In an essay today, FRB Gov. Bowman emphasized that regulatory accountability does not undermine the independence also essential to a sound, innovative banking system.

Gensler Turns to Bank/Hedge-Fund Interconnection

In addition to his speech on AI earlier today, SEC Chair Gensler today engaged in a wide-ranging discussion of key financial policy questions.

Daily021324.pdf

12 02, 2024

Daily021224

2024-02-13T13:14:07-05:00February 12th, 2024|2- Daily Briefing|

Bowman Presses New Community-Bank Regulatory Construct

FRB Gov. Bowman today recommended that community banks be differentiated from larger ones based not on asset size as now, but rather by their business model.  Key criteria, she says, should be a simple and local business model focused on relationship banking.  Community-banking standards should reflect this business model in contrast to other banking strategies and be “fair,” i.e., focused on how challenging and costly it is for community banks to comply with rules that may not meaningfully apply to them.

IMF Targets Margining Risks

Reinforcing the work of global regulators addressing margining liquidity-risk fears, the IMF released a staff study finding that as much as a third of EU investment funds that are large derivatives end-users could not meet their variation-margin requirements under stress.

HFSC Set to Demand Much from Treasury, FinCEN

The HFSC majority-staff memo on Wednesday’s FinCEN hearing makes it clear that Under-Secretary Nelson and FinCEN director Gacki will face hard questioning on anti-money laundering and CFT topics.  These will surely include critical GOP scrutiny of Treasury’s request for additional authority for greater monitoring and enforcement authority over digital assets even though the Digital Asset Subcommittee plans a hearing specifically on this topic later this week.

FFIEC Redesigns Valuation-Bias Exam Protocol

Arguing that deficient real estate valuations due to bias or discrimination cause consumer harm and pose safety-and-soundness risks, the FFIEC today issued a statement of examination principles regarding valuation discrimination and bias in residential lending.  While the principles primarily concern …

30 01, 2024

DAILY013024

2024-01-30T17:13:26-05:00January 30th, 2024|2- Daily Briefing|

FinCEN Estimates High Bank-BOI Reporting Costs

FinCEN via the Federal Register today requested comment on the estimated total annual reporting and recordkeeping burden for new Access Rule beneficial ownership information (BOI) reporting requirements (see FSM Report AML135).

Brown Puts More Pressure on Powell

Following Sen. Warren’s rate-cut demands and affordable housing concerns yesterday, Senate Banking Committee Chairman Brown (D-OH) today sent a letter to FRB Chair Powell also calling for less restrictive monetary policy on grounds that elevated rates negatively impact home affordability, limit the housing supply, restrict small business growth, and dampen wages.

HFSC Targets China Sanctions, Outbound Investments

Today’s HFSC National Security Subcommittee Hearing focused on China sanctions and restrictions on outbound investments.

GOP Demands Retraction of CFPB Tech-Payment Proposal

Reiterating their opposition to the Bureau’s pending digital-payment rule (see FSM Report PAYMENT27), HFSC Chairman McHenry (R-NC) alongside Digital Assets Subcommittee Chairman Hill (R-AR) and Rep. Flood (R-NE) sent a letter today urging the CFPB to reopen and extend the comment period and reconsider finalizing the rule as proposed.

Daily013024.pdf

21 12, 2023

DAILY122123

2023-12-21T16:29:00-05:00December 21st, 2023|2- Daily Briefing|

OFR Nomination Scuttled

Although Sen. Jack Reed (D-RI) recently called for his confirmation, Ron Borzekowski’s appointment as Director of the Office of Financial Research was scuttled yesterday in the Senate.

Treasury Payment-System Policy Addresses Resilience, Reserve-Currency Status, Inter-Operability

Providing an update on Treasury’s working group on the future of money and payments, Deputy Assistant Secretary for International Financial Markets Nicholas Tabor yesterday indicated that the working group is considering the implications of new payment technologies for smooth international financial system functioning, U.S. national security, privacy, and financial inclusion.

Reserve Banks Promise a Peek

Tidying up, the Federal Reserve Bank of New York today released a new “Transparency and Accountability” policy on behalf of all of the System’s Banks.

Regulators Clarify Bank BOI Expectations

FinCEN was today joined by the FDIC, FRB, OCC, NCUA, and State Bank and Credit Union Regulators in an interagency statement clarifying that FinCEN’s beneficial ownership information Access Rule does not create new regulatory requirements or supervisory expectations for banks to access BOI from the beneficial ownership IT System.

Daily122123.pdf

11 12, 2023

Daily121123

2023-12-11T16:51:51-05:00December 11th, 2023|2- Daily Briefing|

Treasury Broadens Illicit Finance Scope to CRE, Investment Advisors

In connection with an order sanctioning two Afghanis for transnational corruption, Treasury and FinCEN today issued a fact sheet on actions under way to address corruption and other illicit transactions.

White House Threatens Veto on Bill Curtailing OCC, Other Agencies

The House Rules Committee is expected today to clear H.R. 357 for floor action as soon as tomorrow, prompting the White House to issue a veto threat.

Warren Presses Case for Crypto Standards in NDAA

Strengthening her position ahead of a fight with HFSC Chair McHenry (R-NC) over crypto provisions in the NDAA, Sen. Warren (D-MA) today announced that Sens. Hickenlooper (D-CO) and Luján (D-NM) alongside Senate Banking Committee members Warnock (D-GA), Butler (D-CA), and Van Hollen (D-MD) joined Sen. Warren and 14 other Senators as co-sponsors of the Digital Asset Anti-Money Laundering Act.

CGFS Wants LTV-Related Capital Rules Adjusted to Reflect House Prices

Reviewing the link between housing finance and systemic risk, the BIS Committee on the Global Financial System’s report today focused on the need for automatic stabilizers that provide macroprudential controls in this high-risk sector.

Daily121123.pdf

20 10, 2023

DAILY102023

2023-10-20T17:21:03-04:00October 20th, 2023|2- Daily Briefing|

Senate AI Measure Tackles Financial Services

The text of the key Senate AI bill, S. 3050, has now become available.

Banking Agencies Offer Olive Branch

Reflecting strong pressure and recent FRB Chair Powell statements, the FRB today announced the launch of an open data collection assessing the rule’s effects – an issue on which many bank comment letters and Congressional Republicans have been scathing.

GOP Renew Funding Campaign vs. CFPB via Fed Losses

HFSC Vice Chairman Hill (R-AR) yesterday reintroduced legislation pressuring both the Fed and CFPB by prohibiting the Fed from transferring its earnings to the Bureau if the Fed incurs an operating loss.

FinCEN Highlights Hamas Sanction Red Flags

Reflecting ongoing Congressional pressure and recent Treasury sanctions, FinCEN today issued an alert reminding financial institutions to remain vigilant for suspicious activity related to Hamas funding sources.

Fed Stays Stoic on Financial-Stability Outlook

The FRB today released is semiannual financial-stability report differing little from the relatively-sanguine outlook in its May report (see Client Report SYSTEMIC94).

Daily102023.pdf

27 09, 2023

DAILY092723

2023-09-27T16:36:21-04:00September 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

20 09, 2023

DAILY092023

2023-09-20T17:11:25-04:00September 20th, 2023|2- Daily Briefing|

Brown, Rounds Agree: AI Credit-Underwriting Warrants Regulatory Attention

At today’s Senate Banking hearing on AI in financial services, Chairman Brown (D-OH) argued that AI should be governed by the same rules as the rest of the financial system, with new law necessary if existing rules prove inadequate.

HFSC FinCEN Bills Draw Bipartisan Support

HFSC Chairman McHenry (R-NC) at today’s markup praised the scope of bipartisan support on today’s FinCEN, sanctions, and other national security bills.

HFSC Delays Bipartisan Sanction Bill Vote

Today’s HFSC markup also considered two bills addressing sanctions policy: H.R. 5512 from Rep. Sherman (D-CA) to require bank subsidiaries to comply with sanctions on Russia and Belarus and H.R. 760 from Rep. Barr (R-KY) imposing blocking sanctions on Chinese defense or surveillance companies and the third-party companies that supply them.

HFSC Dems Continue Strongly Opposing GOP Anti-CBDC Measure

The bipartisan spirit of today’s HFSC markup dissipated as Members fiercely debated H.R. 5403 from Majority Whip Emmer (R-MN), a bill that would bar the Fed from issuing a CBDC to individuals.

Gruenberg: New Shadow Bank Standards Would Cure a Capital Proposal Problem

FDIC Chairman Gruenberg today gave remarks arguing that FSOC along with OFR should establish a new reporting framework to assess the financial stability risks posed by nonbanks and ensure that public reporting is sufficient for market participants to understand nonbank counterparty risk.

HFSC Reports FinCEN, Sanctions, CBDC Bills

HFSC today unanimously reported H.R 760 sanctioning Chinese defense companies, H.R. 5512 requiring bank subsidiaries to comply with sanctions …

7 09, 2023

DAILY090723

2023-09-07T16:43:25-04:00September 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

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