The five US federal agencies responsible for implementing the Volcker Rule have individually released a related notice of proposed rulemaking. The notice proposes amendments to the Volcker Rule regulations that would implement two statutory changes required by the Economic Growth, Regulatory Relief and Consumer Protection Act. Comments in response to the notice must be received by the agencies within 60 days of its publication in the Federal Register.
The Office of the Comptroller of the Currency (OCC) recently announced – to much anticipation – that it will begin accepting applications from fintech companies for special purpose national bank charters (commonly referred to as 'fintech charters'). However, state banking regulators are likely to once again challenge the OCC's authority to grant fintech charters, which could create some uncertainty for early applicants.
The Financial Crimes Enforcement Network recently issued new frequently asked questions regarding its customer due diligence (CDD) rule. The CDD rule applies to banks, among others, and includes four core elements of CDD, each of which should be included in anti-money laundering programmes.
The Board of Governors of the Federal Reserve System has announced revisions to the Annual Report of Foreign Banking Organisations (FR Y-7) which will enable foreign banking organisations (FBOs) to certify their compliance with US risk committee and home country capital stress testing requirements under Regulation YY. The FR Y-7 is an annual report submitted by qualifying FBOs to provide financial, organisational, shareholder and managerial information to the board.
The Treasury Department recently released its long-awaited report to reform the US financial system. The report includes dozens of recommendations to reform laws, treaties, regulations, guidance, reporting and recordkeeping requirements and other government policies that inhibit federal regulation of the financial system in a manner consistent with the set of core principles enunciated by President Trump in Executive Order 13772.
The Office of the Comptroller of the Currency (OCC) has confirmed its intention to explore issuing limited-purpose national bank charters to financial technology (fintech) firms engaged in banking activities, commonly called 'fintech charters'. Earlier this year, the OCC had signalled this possibility; now, through the release of a policy paper and a speech by the comptroller, it has taken a more formal step.
The New York State Department of Financial Services recently issued a final rule setting out the minimum requirements for transaction monitoring and filtering programmes used by regulated institutions to monitor potential Bank Secrecy Act and anti-money laundering violations, suspicious activity reporting and sanctions violations. It also requires regulated institutions to confirm annually that all necessary steps have been taken to ensure compliance.
The Federal Reserve System has issued supervisory guidance for assessing risk management at supervised institutions with total consolidated assets of less than $50 billion. The guidance sets out various factors that examiners and staff will consider when assessing the adequacy of a covered institution's risk management controls and deciding on the overall risk management rating.
The Financial Crimes Enforcement Network has published a final rule that formalises new and existing customer due diligence requirements for banks (including branches and agencies of foreign banks in the United States), broker-dealers in securities, mutual funds, futures commission merchants and introducing brokers in commodities. This is intended to promote a more level playing field across and within financial sectors.
A new anti-money laundering regulation was recently proposed that would apply to banking institutions that are chartered or licensed under the New York Banking Law. It sets forth the minimum attributes of a robust transaction monitoring and watch list filtering programme for detecting illegal transactions, and requires an institution's senior compliance officer to certify annually that it has sufficient programmes in place to comply with the regulation.
The Financial Crimes Enforcement Network has published a notice of proposed rulemaking in the Federal Register pertaining to the development of customer due diligence requirements that would be applicable to banks, broker dealers, mutual funds and futures commission merchants and introducing brokers in commodities. The proposed rule focuses on the four core elements of customer due diligence.
The Federal Reserve Board has approved a final rule to implement certain enhanced prudential standards required under Section 165 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rule includes risk-based and leverage capital requirements, liquidity standards, risk management and risk committee requirements and stress testing.
The Federal Reserve System recently approved a final rule that substantially revises the capital rules for US banking organisations. Key reforms include increased requirements for both the quantity and quality of capital held by banks so that they are more capable of absorbing losses and withstanding periods of financial distress, and the establishment of alternative standards of creditworthiness in place of credit ratings.
The Federal Reserve Board has released an interim final rule clarifying that uninsured US branches and agencies of foreign banks will be treated as insured depository institutions for purposes of Section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 'swaps push-out rule'). In practical terms, uninsured US branches and agencies of foreign banks may continue certain limited swap activities.
The Federal Reserve Board has issued a notice of proposed rule making which would implement the enhanced prudential standards and early remediation requirements in Sections 165 and 166 of the Dodd-Frank Wall Street Reform and Consumer Protection Act for certain foreign banking organisations (FBOs). The new rules are designed to respond to vulnerabilities in FBO activities observed during and after the financial crisis.
The Federal Deposit Insurance Corporation has approved an interim final rule, with request for comments, to implement certain provisions of Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Title II provides for the orderly liquidation under a special resolution regime of a financial company whose failure would have serious adverse effects on the financial stability of the United States.
The Basel Committee on Banking Supervision recently issued a final set of Principles for Enhancing Corporate Governance in the banking sector. Since the adoption of the 2006 principles, there have been a number of corporate governance failures and lapses, many of which became apparent during the financial crisis that began in 2007; the revised principles are intended to deal with these issues.
The Financial Crimes Enforcement Network (FinCEN) recently proposed new regulations which would require some US financial institutions to submit reports on certain cross-border electronic transmittal of funds. They would also require all banks to file annually with FinCEN a list of account numbers and US taxpayer identification numbers of account holders which transmitted or received a cross-border electronic fund transmittal.
The US and UK anti-money laundering laws and regulations compare favourably in that both regimes stipulate extensive regulatory requirements for banking institutions to implement and maintain anti-money laundering procedures. However, certain differences mean that developing an anti-money laundering framework that is consistent with UK and US requirements may not be as straightforward as it seems.
The Office of Foreign Assets Control (OFAC) has issued an interim final rule to describe economic penalty enforcement procedures for banking institutions. The interim rule, which applies to 'banking institutions' (ie, depositary institutions supervised or regulated by a federal banking regulator), explains the procedures that OFAC will follow with respect to economic penalty violations.
The US bank regulatory environment is one of heightened scrutiny and expectations in all areas of a bank's operations. A prudent response calls for serious attention to implementing principles of 'enterprise-wide risk management' and continuous adoption of refinements and upgrades in compliance processes.
Banks with US operations will need to take a number of steps to implement the requirements and best practices made explicit by the new Bank Secrecy Act/Anti-money Laundering Examination Manual. The high level of detail in monitoring and record-keeping that is now expected is evident in the surveillance expected even of routine customer activities such as trade finance.
The Federal Financial Institutions Council recently released its long-awaited revision of the Bank Secrecy Act/Anti-money Laundering Examination Manual. It emphasizes a banking organization's responsibility to implement risk-based policies and procedures to comply with the Bank Secrecy Act, and to safeguard its operations from money laundering and the financing of terrorism.
Recent enforcement actions against UBS and Riggs National Bank highlight the continuing challenge of money laundering and USA PATRIOT Act compliance issues for international banks with US operations. Complex structured finance transactions and the continuing US-EU regulatory dialogue have also captured recent headlines.
In the post Gramm-Leach-Bliley era, anti-tying compliance has taken on a new urgency because of the intricacies of the anti-tying prohibitions and the liberalization of the variety of permitted banking activities. A Federal Reserve Board interpretation indicates the serious treatment that anti-tying safeguards will receive from US banking regulators and bank examiners in the near term.
Anti-money laundering initiatives such as the USA Patriot Act currently being implemented will be successful in the long run only if accompanied by global efforts to eradicate the financial underpinnings of terrorism. Two years after the events of September 11 2001, the challenge remains and the outcome is uncertain.
The US Department of Treasury and other federal banking agencies have issued a final rule requiring financial institutions to implement certain minimum procedures as part of their know-your-customer programmes. In order to ensure compliance with the final rule, banks should review their policies and procedures relating to current customer identification, and amend them where necessary.
The US Treasury Department recently issued final rules to implement sections of the USA Patriot Act, which provide guidance on the maintenance of correspondent accounts for foreign banks, and on the sharing of information between financial institutions and government agencies.
For financial institutions, compliance obligations related to the fight against terrorism and money laundering have increased dramatically over the past 10 months. This update traces the development of these new regulatory requirements and makes some suggestions for ongoing compliance.
New rules issued under the USA Patriot Act define the term 'account' broadly enough to require broker-dealers to obtain certificates from foreign individuals and entities having 'accounts' with them. In addition, suspicious activity reports will now be required from broker-dealers as well as commercial banking entities.
The New US Patriot Act, enacted in the wake of the terrorist acts of September 11, has expanded the laws and regulatory authority that apply to money laundering, asset forfeiture and related areas, and introduced new substantive criminal offences related to terrorism and money laundering.
The Financial Crimes Enforcement Network recently published notice of a proposed rule prescribing anti-money laundering requirements for investment advisers that are, or are required to be, registered with the Securities and Exchange Commission. The rule addresses concerns that money launderers and illicit actors seeking to access the US financial system may gain entry through investment advisers.