A federal district judge recently denied a motion to dismiss filed by the US Office of the Comptroller of the Currency (OCC) in a lawsuit brought by the New York State Department of Financial Services, which challenged the OCC's decision to begin accepting applications from fintech companies for special purpose national bank charters.
In July 2018 the Office of the Comptroller of the Currency (OCC) announced its decision to begin accepting applications from fintech companies for special purpose national bank charters (the Fintech Charter Decision). The New York State Department of Financial Services recently filed a federal court complaint seeking to enjoin further actions by the OCC to implement the Fintech Charter Decision and related actions, arguing that such acts are lawless, ill-conceived and destabilising for financial markets.
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 US Court of Appeals for the Ninth Circuit recently held that California's statute prohibiting credit card surcharges violated the First Amendment as applied to the proposed surcharge practices of the merchant-plaintiffs. The Ninth Circuit used the same reasoning as a recent Supreme Court case to hold that California's surcharge ban regulated speech rather than conduct, therefore posing First Amendment concerns.
The Consumer Financial Protection Bureau recently issued proposed amendments to its final rule to expand existing consumer protections for electronic fund transfers to pre-paid accounts. Among other things, the proposal would modify the final rule to exempt pre-paid account issuers from the error resolution and limitation of liability provisions with respect to unregistered cardholders and provide more flexibility to issuers of digital wallet accounts that are covered by the final rule.
The Office of the Comptroller of the Currency recently issued a set of frequently asked questions (FAQs) to supplement its 2013 bulletin on third-party relationship risk management. The FAQs affirm the bulletin's broad applicability, while re-emphasising the need for third-party relationship oversight to be risk based and tailored to individual institutions' needs and delving into several more detailed compliance questions.
The former chief compliance officer of MoneyGram, Thomas E Haider, and the Financial Crimes Enforcement Network (FinCEN) have jointly filed a stipulation and order of settlement and dismissal in the US District Court of Minnesota. This follows FinCEN's earlier-filed complaint against Haider seeking to hold him personally liable for MoneyGram's violations of the Bank Secrecy Act and its implementing regulations.
President Trump recently issued two executive actions which constitute the first official statements on how his frequent criticism of the Dodd-Frank Act and the broader financial regulatory climate following the financial crisis may be translated into actual reform efforts. The executive order sets out core principles for regulatory reform without making any specific policy recommendations, while the memorandum directs the Department of Labour to re-examine its 2016 Fiduciary Duty Rule.
The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation recently issued a joint advanced notice of proposed rulemaking regarding enhanced cyber-risk management standards for certain entities. The enhanced standards would establish increased supervisory expectations for the entities and services that potentially pose a heightened cyber-risk to the safety and soundness of the financial sector.
The Consumer Financial Protection Bureau recently issued its final rule to extend consumer protections to most pre-paid accounts and to extend certain other protections for credit cards to pre-paid accounts that are associated with certain lines of credit or overdraft credit plans. The rule will cover reloadable and non-reloadable plastic pre-paid cards, certain mobile wallets and electronic accounts that hold pre-paid value and the financial institutions that issue such pre-paid accounts.
The Office of the Comptroller of the Currency recently published a notice of proposed rulemaking and a request for public comment introducing a regulatory regime to govern the receivership of national banks. While the proposed rule would apply to the existing pool of 52 uninsured national trust banks, its broader impact would be to establish a receivership regime that supports the creation of new forms of limited purpose, uninsured banks for the financial technology industry.
The Federal Deposit Insurance Corporation recently issued proposed examination guidance on third-party lending arrangements. The proposed guidance would apply broadly to any lending arrangement where a third party performs a significant aspect of the lending process and may affect a swathe of loan programmes, including private-label and co-branded credit cards and marketplace, automobile and basic mortgage lending.
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.
The federal banking agencies and the Financial Crimes Enforcement Network recently published interagency guidance to issuing banks on the application of the joint regulations implementing customer identification programme (CIP) requirements to their prepaid cards. The guidance clarifies that a bank should apply its CIP to the cardholders of certain prepaid cards issued by the bank and other prepaid access devices that meet the criteria in the guidance.
The Division of Consumer Services of the Department of Financial Institutions in the State of Washington recently issued an interpretation providing that merchant payment processing constitutes money transmission under the Washington Uniform Money Services Act. The interpretation concludes that merchant payment processors are subject to licensing and other requirements under the act unless a waiver is granted by the department.
To address the need for uniformity in state regulation of virtual currencies, a drafting committee of the Uniform Law Commission has been working on a proposed uniform state Regulation of Virtual Currency Businesses Act. The committee recently met to discuss a revised draft of the act. The committee's stated mission is to harmonise state-level regulation of virtual currencies in the absence of an overarching federal payments regulatory framework.
The District Court for the District of Minnesota recently denied the motion of defendant Thomas E Haider to dismiss the federal government's complaint seeking to hold Haider personally liable for violations of the Bank Secrecy Act and its implementing regulations by MoneyGram International Inc during his tenure there as chief compliance officer. The parties have been ordered to appear for a pre-trial conference.
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 Consumer Financial Protection Bureau recently issued a final rule that significantly amends and expands the scope of data reporting requirements under Regulation C and the Home Mortgage Disclosure Act. The rule implements changes to existing Home Mortgage Disclosure Act data reporting and includes an entirely new set of data points that institutions were not previously required to collect and report.
The Conference of State Bank Supervisors has issued its Model Regulatory Framework for State Regulation of Certain Virtual Currency Activities to assist states in developing regulatory approaches to licensing and supervising virtual currency activities. The model framework is a high-level outline that will require substantial elaboration as individual states attempt to use it to guide their own rule-writing efforts.
The New York State Department of Financial Services (DFS) recently released its final BitLicence rules to regulate virtual currency businesses. Nearly all the changes in the final rules are of a technical or clarifying nature. However, the final rules eliminate the obligation to file transaction reports and suspicious activity reports with the DFS where such reports already must be filed with the federal government.
Virtual currency exchanger Ripple Labs Inc and its wholly owned subsidiary XRP II LLC recently entered into a consent agreement with the Financial Crimes Enforcement Network in which Ripple consented to a $700,000 civil penalty and admitted that it had failed to register as a money services business (MSB). This was the first civil enforcement action against a virtual currency exchanger for failing to register as an MSB.
The New York State Department of Financial Services (DFS) has issued a revised version of its proposed 'BitLicence' regulatory framework for public comment, amending the original rules proposed in July 2014. While the DFS has responded to comments on a number of key elements of the regulations and has taken steps to make the revised regulations more workable for the industry, other issues remain.
The US Financial Crimes Enforcement Network recently filed a civil complaint against Thomas Haider, former chief compliance officer for MoneyGram International Inc. The complaint seeks monetary and injunctive relief from Haider in his personal capacity, alleging a wilful failure to implement an effective anti-money laundering compliance programme and properly file suspicious activity reports.
The Consumer Financial Protection Bureau recently issued a far-reaching proposal to extend consumer protections to most pre-paid cards and accounts. The proposed rule would also extend protections for credit cards to pre-paid cards and accounts that are associated with lines of credit or overdraft credit plans.
A federal court has ruled that disparate impact claims are not cognisable under the Fair Housing Act. This is the latest decision in a long-developing debate over the use of disparate impact claims in discrimination cases brought under the Fair Housing Act and the Equal Credit Opportunity Act.
The Financial Crimes Enforcement Network (FinCEN) has issued two administrative rulings on companies engaged in virtual currency activities. Companies engaged in activities involving virtual currencies should note that FinCEN does not recognise the exchange of virtual currency as a non-money transmission related service.
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 New York State Department of Financial Services (DFS) recently issued for public comment its proposed 'BitLicense' regulatory framework and an accompanying press release. The release of the proposed regulations follows the announcement that the DFS would consider proposals and applications in connection with the establishment of virtual currency exchanges in New York.
Companies often ask how they should approach a Consumer Financial Protection Bureau (CFPB) enforcement matter if it lands on their desk. Because the industry is still trying to figure out how the CFPB operates, they are concerned about making a misstep during the course of an investigation. This update sets out essential tips from a former enforcement attorney for successfully navigating an investigation while positioning your company for the best outcome.
The Financial Crimes Enforcement Network (FinCEN) recently published five administrative rulings, providing additional information on how exemptions from money transmitter status may or may not apply to certain business models under the regulations promulgated by FinCEN under the Bank Secrecy Act.
The Financial Crimes Enforcement Network (FinCEN) has published rulings regarding whether companies engaged in 'mining' software development and investment with respect to virtual currencies must register as money services businesses. The rulings provide insight on how FinCEN will interpret the recent regulations and guidance.
The Consumer Financial Protection Bureau (CFPB) has issued a proposed rule that would permit it to supervise non-bank international money transfer providers that satisfy the proposed rule's definition of 'larger participant'. The rule's impetus is to provide the CFPB with supervisory authority to ensure that non-bank international money transfer providers adhere to consumer protection rules for international remittances.
The Federal Reserve System's new Guidance on Managing Outsourcing Risk is the most recent publication in a series of supervisory and enforcement actions by federal regulators of financial institutions clarifying regulatory expectations with respect to outsourcing and selection and management of third-party service providers. It describes the heightened regulatory scrutiny that now applies to the outsourcing activities of covered financial institutions.
The Office of the Comptroller of the Currency (OCC) recently released a bulletin highlighting the enhanced scrutiny to which national bank engagements of third-party service providers are now subject. National banks should revisit their policies, procedures and processes for evaluating, engaging and monitoring third-party service providers in light of this new articulation of the OCC's supervisory expectations.
Federal banking agencies recently released an inter-agency statement responding to inquiries about whether a creditor would be liable under the disparate impact doctrine of the Equal Credit Opportunity Act and its implementing regulation, Regulation B, by originating only qualified mortgages.
The US District Court for the District of Columbia has granted summary judgment in NACS v Board of Governors of the Federal Reserve System, ruling in favour of a group of retailers and retailer trade associations in a lawsuit in which those parties sought to overturn the final rule of the board of governors of the Federal Reserve System that set standards for debit card interchange transaction fees and network exclusivity prohibitions.
The Consumer Financial Protection Bureau (CPFB) has released a final rule implementing the remittance transfer provisions in Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The final rule provides important new flexibility for remittance transfer providers, especially in open-loop environments such as international wire transfers. The CFPB also extended the effective date of the final rule to October 28 2013.
The Consumer Financial Protection Bureau (CFPB) recently issued guidance stating that it intends to use its regulatory tools, including enforcement lawsuits, to address discriminatory practices in auto lending. The CFPB bulletin represents an important development for the exercise of its fair-lending authority, as well as its authority over auto loans.
The Financial Crimes Enforcement Network recently issued guidance on how the Bank Secrecy Act applies to users, administrators and exchangers of 'convertible virtual currency'. Companies engaged in activities involving such currencies should assess the impact of the guidance on their obligations. Administrators and exchangers of such currencies should re-evaluate their status under money transmitter licensing laws.
The Federal Financial Institutions Examination Council has issued a request for comment on proposed guidance entitled "Social Media: Consumer Compliance Risk Management Guidance". Once finalised, institutions will be expected to use the guidance in developing and implementing risk management policies and practices to manage and control risks associated with social media.
The Consumer Financial Protection Bureau has released a proposed rule and request for comments outlining a limited set of revisions to its previously published final rule on international money transfers, and an extension of the date on which the rule would become effective. The proposal would amend the rule implementing Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act on remittance transfers.
A recent Eleventh Circuit opinion has provided an important precedent for the banking industry. The Chavez decision should prompt financial institutions to review the language of their funds transfer agreements to ensure that the agreements unambiguously reference the bank's discretionary security procedures as part of the Article 4A security procedures agreed to by customers.
The Financial Crimes Enforcement Network recently published in the Federal Register an advance notice of proposed rulemaking pertaining to the development of a customer due diligence regulation applicable to banks, brokers and dealers in securities, mutual funds and futures commission merchants which focuses on the collection of beneficial ownership information about account holders
The Financial Crimes Enforcement Network (FinCEN) recently released a set of frequently asked questions (FAQs) to assist providers and sellers of pre-paid access in understanding certain aspects of the final pre-paid access rule that FinCEN issued earlier in 2011. FinCEN makes clear that the FAQs provide interpretive guidance only, and do not supersede any aspect of the pre-paid access rule.
The Financial Crimes Enforcement Network recently published a final rule that revises the Bank Secrecy Act requirements currently applicable to money services businesses with regard to stored value products and services. The final rule renames 'stored value' as 'pre-paid access' and creates two new categories of money services business – providers of prepaid access and sellers of pre-paid access.
Section 1073 of the Dodd-Frank Wall Street Reform and Consumer Protection Act amended the Electronic Fund Transfer Act to establish a disclosure and error resolution regime for consumers who use 'remittance transfer providers' to send remittances to recipients located in a foreign country. The Board of Governors of the Federal Reserve System has now issued proposed rules to implement these provisions.
The Federal Deposit Insurance Corporation (FDIC) recently issued frequently asked questions (FAQs) and answers in response to questions from FDIC-supervised institutions and third-party vendors about the FDIC's Overdraft Payment Supervisory Guidance. The FAQs provide further explanation of the FDIC's supervisory expectations regarding overdraft payment programmes.
The Board of Governors of the Federal Reserve System has released for comment a proposed regulation to implement the debit interchange fee and network exclusivity and routing provisions of the Durbin Amendment. The amendment added a new Section 920 to the Electronic Fund Transfer Act regarding debit interchange transaction fees and rules for debit card transactions.
The Federal Deposit Insurance Corporation has proposed regulations 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 Financial Crimes Enforcement Network has released a proposed rule that would revise the Bank Secrecy Act requirements for money services businesses with regard to stored value products and services. The rule is intended to address "regulatory gaps that have resulted from the proliferation of prepaid innovations over the last ten years and their increasing use as an accepted payment method".
The Board of Governors of the Federal Reserve System has released its final rule regarding overdraft services. The rule creates an opt-in rule under which financial institutions may not charge overdraft fees to consumers in connection with automated teller machine transactions and one-off debit card transactions, unless the consumer has affirmatively consented to such fees.
The Federal Deposit Insurance Corporation (FDIC) has adopted its final Statement of Policy on the Acquisition of Failed Bank Depository Institutions. While the FDIC has relaxed some of the originally proposed restrictions, the statement still stands as a significant impediment to private equity financing of the resolution of failed institutions.
The president has released a presidential memorandum setting out the administration's general policy with regard to federal pre-emption of state law by executive departments and agencies of the federal government. In the last 10 years the federal banking agencies have taken several regulatory actions, including the adoption of final rules, that construe the extent to which federal law pre-empts state law.
The Department of the Treasury's Financial Crimes Enforcement Network has released a proposed rule to revise its regulations regarding money services businesses under the Bank Secrecy Act. It intends to revise the existing definitions to clarify the scope of entities subject to regulation as money services businesses, but in so doing raises significant issues for the delineation of entities subject to the rule.
A statement has been issued announcing the imminent release of the Supervisory Capital Assessment Programme capital assessment of the 19 largest US bank-holding companies and describing how those results should be understood. The joint statement also outlines the requirements applicable to bank holding companies that wish to redeem outstanding Capital Purchase Programme preferred stock.
The Department of the Treasury has outlined its framework for financial regulatory reform. In addition, three bills are under consideration: two companion bills that would create a new federal systemic risk regulator to oversee regulation of the US financial markets, and a third which that grant the Federal Deposit Insurance Corporation the power to take over and resolve systemically important financial companies.
The Federal Deposit Insurance Corporation (FDIC) has issued an interim rule to extend the Temporary Liquidity Guarantee Programme to include issuances of certain mandatory convertible debt. Under the programme, the FDIC guarantees certain senior unsecured debt of participating insured depository institutions and insured depository institution holding companies that matures on or before June 30 2012.
Secretary of the Treasury Timothy Geithner has outlined the six-point plan with which the Department of the Treasury, in cooperation with Federal Reserve, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision and the Office of the Comptroller of the Currency, hopes to bring stability to the US credit markets.
In a significant departure from its previous stance, the Federal Deposit Insurance Corporation (FDIC) has published notice of a new General Counsel's Opinion No 8 which addresses whether funds underlying stored-value cards and other non-traditional access mechanisms are to be considered deposits insured by the FDIC. The new opinion should be reviewed by all participants in stored-value programmes.
The Board of Governors of the Federal Reserve System and the Department of Treasury have issued a final regulation implementing key portions of the Unlawful Internet Gambling Enforcement Act of 2006. The regulations, which prohibit any "business of betting or wagering" from knowingly accepting payments in connection with participation in unlawful internet gambling, will affect many financial institutions.
The US Treasury Department, the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation have announced the implementation of “extraordinary steps”, including the promulgation of a Capital Purchase Programme, the creation of the Temporary Liquidity Guarantee Programme and further details of its Commercial Paper Funding Facility.
The Federal Reserve has issued guidance that further refines, clarifies and, to a limited extent, relaxes its prior positions on the circumstances under which it will find a minority equity investment in a bank or bank holding company to constitute a “controlling influence over the management or policies” of the bank or bank holding company.
The federal financial institution regulatory agencies and the Federal Trade Commission have published final rules on identity theft 'red flags' and address discrepancies. Among other things, financial institutions and creditors that hold a covered account must develop and implement a written programme for combating identity theft in connection with new and existing accounts.
The Second Circuit has handed down an eagerly awaited decision in Clearing House Association v Cuomo. The court held that the National Bank Act blocked the New York attorney general from probing the loan practices of national banks and their operating subsidiaries, stating that federal regulations shield such institutions from investigation and enforcement action by state officials.
The Securities and Exchange Commission (SEC) and the board of governors of the Federal Reserve System have issued a release adopting new Regulation R to implement the Gramm-Leach-Bliley Act statutory exceptions for bank brokerage activities. The SEC has also issued a companion release adopting certain additional bank dealer exemptions and related rule amendments.
In Watters v Wachovia Bank the court held by a five-to-three majority that the National Bank Act pre-empts Michigan statutes requiring operating subsidiaries of national banks to register with, and be subject to examination by, state regulators.
The Securities and Exchange Commission and the board of governors of the Federal Reserve System have proposed new Regulation R in order to implement the Gramm-Leach-Bliley Act statutory exceptions for bank brokerage activities. The proposed regulation addresses four of the 11 statutory bank exceptions to the general broker definition contained in the Securities Exchange Act 1934.
Section 670 of the John Warner National Defence Authorization Act, as recently adopted by Congress, includes restrictions on credit extended to certain members of the armed forces and their dependants. Although the original intent of the act was to regulate payday or other 'high-cost' loans made to active duty service members, the scope of the legislation could be broader and affect consumer credit programmes.
Congress has recently passed the Financial Services Regulatory Relief Act 2006. The act represents a long-anticipated bank regulatory relief package that streamlines certain regulations pertaining to financial institutions, although the act is more limited than many in the banking industry had wanted. In addition, the act expands the enforcement power of the federal banking agencies.