#sanctions – Federal Financial Analytics

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…

27 01, 2023

DAILY012723

Eliza Allen2023-01-27T17:09:47-05:00January 27th, 2023|2- Daily Briefing|

IOSCO Report Calls for More Hedge-Fund Liquidity Data, Studies Continue on MMFs/OEFs

IOSCO today released its Investment Funds Statistics Report, consisting almost entirely of data on matters such as leverage, portfolio liquidity, and fund exposures. The paper also mentions recent SEC proposals to amend the investment adviser reporting form and to require more frequent portfolio reporting.

Fed Takes Tough Stand Against Wyoming Crypto Charter

The Federal Reserve today took two policy-making actions cracking down on non-traditional charters. We will shortly provide clients with an alert and then an in-depth analysis of a new Fed policy redefining state-member bank charter powers.

Fed Not Only Quashes Custodia, But Also Constrains Non-Traditional Charter Powers

In addition to rejecting Custodia’s member application (see prior FedFin alert), the Fed today issued a sweeping policy statement scuttling efforts to use uninsured state member banks for activities impermissible for state IDIs and, in most cases, those allowed for national banks.

White House Expands Crypto Legislative Demands

In a new White House crypto “roadmap,” National Economic Council Director Brian Deese largely reiterated actions such as those by the Fed today and ongoing efforts to block AML and sanctions violations in this volatile sector.

Daily012723.pdf…

25 01, 2023

DAILY012523

Eliza Allen2023-01-25T16:55:15-05:00January 25th, 2023|2- Daily Briefing|

SEC Re-Proposes Rule Targeting ABS Conflicts of Interest

The SEC today voted 5-0 to re-propose a controversial 2011 rule required under the Dodd-Frank Act (see FSM Report ABS17) barring the kinds of conflicts of interest all too evident before the great financial crisis related to asset-backed securitizations (ABS). Although the vote was unanimous, GOP commissioners had significant concerns with the proposal, several of which were shared by Democratic Commissioner Crenshaw. Questions on which the SEC will seek comment or where regulatory changes are possible include the extent to which internal firewalls could be considered sufficient under the law as barriers to conflicts of interest and/or if disclosures to investors are a possible alternative.

FinCEN Targets CRE Sanctions Evasion

Building on its sanctions evasion alert last year, FinCEN today issued an alert detailing red flags that may signal potential sanctions evasion via U.S. CRE investment. Citing the lack of visibility in CRE markets and its large proportion of foreign investors, FinCEN again warns that Russian oligarchs may use shell companies, third-parties, or other proxies to circumvent money laundering and beneficial ownership controls. It also lists the use of an offshore private investment vehicle, ownership of CRE through multiple jurisdictions without a clear business purpose, and failure to disclose beneficial ownership information, among others, as potential red flags that may warrant a suspicious activity report.

Daily012523.pdf…

23 11, 2022

DAILY112322

Eliza Allen2022-11-23T12:42:48-05:00November 23rd, 2022|2- Daily Briefing|

OFAC Updates Guidance For Price-Cap Sanction Compliance

Reflecting ongoing negotiations about the level of the oil-price cap, OFAC last night provided updated guidance to banks and insurers about when transactions may violate this latest sanction. The new guidance identifies “covered services” for financing; this means a commitment for the provision or disbursement of debt, equity, or economic resources related to the maritime transport of Russian oil. However, and as before, U.S. persons are authorized to provide covered services if the Russian oil is purchased at or below the price cap.

FDIC Signals Tougher GSIB Resolution Reviews

With the FDIC signaling a tough new approach to resolution plan approval, the FRB and FDIC today announced the results of the resolution plans filed by U.S. GSIBs in July, 2021. All the banking organizations saw their plans approved except for Citigroup, which had noted shortcomings due to data quality and management concerns; the bank now has until January 31, 2023 to submit a revised plan. FDIC Acting Chairman Gruenberg noted that, going forward, the agencies will conduct more detailed reviews of internal testing results and independent capability assessments.

Daily112322.pdf…

20 10, 2022

DAILY102022

Eliza Allen2022-10-20T17:36:06-04:00October 20th, 2022|2- Daily Briefing|

Fed Staff Study: Climate Risk-Based Capital Impossible for Foreseeable Future

FRB staff released a stylized study of one critical climate-risk policy question: the extent to which banks should hold capital against it. Members of Congress have suggested this over recent years (see FSM Report GREEN9) and the BIS at the outset of its thinking recommended both “brown-penalty” and “green-incentive” capital charges (see Client Report GREEN).

FSB Presses for MMF, Open-End Rules; Government-Bond CCPs

Continuing its NBFI focus (see Client Report NBFI), the FSB today issued new recommendations to address government-security market illiquidity.

Gruenberg Gives No Clue as to Timing, Content of Inter-Agency Crypto Guidance

In remarks today, Acting Chairman Gruenberg reiterated the risks laid out in the FSOC digital asset report (see Client Report CRYPTO33), repeated warnings against misrepresenting FDIC deposit insurance, and announced forthcoming interagency crypto guidance without providing any details or timeline.

Bipartisan Senators Press Secondary Sanctions for Enactment

Sens. Toomey (R-PA) and Van Hollen (D-MD) released a readout of a conversation with the Ukrainian Ambassador on the upcoming G7 Russian oil price cap, positioning their oil sanctions amendment for inclusion in the National Defense Authorization Act (NDAA) in light of the Ambassador’s support for it.

Warren Calls for Stronger, More Transparent CFPB Remittance Rule

Joined by four Senate Democrats, Sen. Warren (D-MA) today sent a letter to CFPB Director Chopra asking that the agency strengthen its remittance rule to ensure greater transparency for exchange rates and fees it …

22 09, 2022

REFORM212

Max Camateros-Mann2022-10-12T17:06:54-04:00September 22nd, 2022|5- Client Report|

HFSC Goes Easy on CEOs

At today’s big-bank oversight HFSC hearing, Committee Democrats focused on each bank’s progress on social issues, such as internal diversity, unionization, and historic roles in financing slavery. Although Chairwoman Waters (D-CA) called for more restrictive merger-approval criteria in her opening statement, Democrats largely left the issue untouched. Ranking Member McHenry (R-NC) framed the hearing as political “theater,” focusing on discrediting capital increases. Committee Republicans also asked CEOs about inflation, fiscal policy, and gun merchant codes. Chairwoman Waters concluded this marathon session by chastising the CEOs for failing fully to answer the questions she posed ahead of the hearing and demanding that they do so in five legislative days.

REFORM212.pdf…

20 09, 2022

SANCTION19

William Cross2022-10-12T17:09:15-04:00September 20th, 2022|5- Client Report|

Senate Banking Questions Sanctions Impact

Today’s Senate Banking hearing on Russian sanctions showcased bipartisan concern that anti-Russian sanctions have yet to have meaningful impact and doubts about the extent to which oil-price caps will reverse this. Ranking Member Toomey (R-PA), joined by Sen. Van Hollen (D-MD), have thus introduced a measure to mandate secondary sanctions on financial institutions involved in a transaction with Russian oil above the price cap.

SANCTION19.pdf…

9 09, 2022

DAILY090922

Eliza Allen2022-10-24T12:01:09-04:00September 9th, 2022|2- Daily Briefing|

White House Reaffirms Anti-Algo Stand

The White House late yesterday announced core bigtech policy principles. These are extremely general and do not go as far in areas such as antitrust that progressives sought.

U.S. Announces Start of Work on Basel “End Game”

Ahead of what might otherwise have been a fractious Basel Committee meeting, the Fed, OCC, and FDIC today reaffirmed the U.S. commitment to finalize what FRB Vice Chair Barr Wednesday called the Basel III “end-game.”

Basel Chair Announces Preliminary AI Priorities

Pablo Hernández de Cos, Chair of the Basel Committee, announced today the work that regulators plan on AI and algorithmic decision-making.

OFR Details Climate Data-Sharing Efforts

Acting OFR Director James Martin today addressed the need for integrated climate-related financial data and challenges to forecasting and modeling climate risk.

Liang Stresses Climate-Resiliency

Treasury Under Secretary Liang today reiterated an array of agency and Administration climate-risk priorities, emphasizing ongoing Treasury and FSOC climate resiliency efforts and underscoring Treasury’s commitment to a net-zero economy.

Treasury To Issue Price-Cap Sanction Guidance

Deputy Treasury Secretary Wally Adeyemo today made it clear that enforcement of the anti-Russia oil-price caps will depend not only on restricting shipping insurance, but also doing so for financial and payment services.

Daily090922.pdf…

30 06, 2022

DAILY063022

Eliza Allen2023-01-24T15:53:35-05:00June 30th, 2022|2- Daily Briefing|

OFAC Updates Counter-Terrorism Sanctions

OFAC today adopted a final rule that amends the Global Terrorism Sanctions Regulations to implement a 2019 executive order and make several minor technical changes.

Basel Crafts Stringent New Regime for Crypto Exposures

As promised, the Basel Committee today tried again to craft a global prudential regime for bank crypto exposures. We will shortly provide clients with an in-depth analysis of the new consultation, which replaces a controversial first round (see FSM Report CRYPTO19) with one that continues add-on capital requirements for higher-risk digital assets (now redefined for stablecoins).

FSB Frets About Commodity, Resilience Risk

The FSB’s plenary today is far more pessimistic about both macroeconomic and financial conditions than it was just a month ago. Although it then worried about commodity-market volatility, these concerns now are heightened by large margin calls, “undetected” leverage, and concentrated exposures.

CFPB Pledges Guidance on Wage Access Products

The CFPB today terminated the Sandbox Approval Order for Payactiv, an earned wage access company, removing an exemption for some of the company’s products from liability under the Truth in Lending Act. Payactiv requested the termination in order to make changes to its fee model, as changes to its products would require modifications to the order.

Daily063022.pdf…