Banking System
Banking System and Electronic Transfer for Business

On June 28, 2024, in an effort to bolster financial institutions’ anti-money laundering and countering the financing of terrorism (“AML/CFT”) programs, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a proposed rule that would enumerate the minimum components required to be included within financial institutions’ AML/CFT programs. The types of financial institutions that would be affected by the proposed rule include banks, casinos, money services businesses, brokers-dealers, mutual funds, insurance companies, futures commission merchants and introducing brokers in commodities, operators of credit card systems and loan or finance companies. At a high level, the proposed rule would require AML/CFT programs to contain a mandatory risk assessment process and compel financial institutions to incorporate FinCEN’s government-wide AML/CFT priorities into risk-based programs. A financial institution’s risk assessment process would need to involve the identification, evaluation and documentation of its risks related to money laundering, the financing of terrorism and other illicit finance activity, based on its particular business activities (e.g., products, services, distribution channels, customers, intermediaries and geographic locations).

While FinCEN is encouraging commenters to provide input on all aspects of the proposed rule, it is specifically seeking responses to, among others, the following questions:

  1. Are there other approaches for a financial institution to identify, manage and mitigate illicit finance activity risks aside from a risk assessment process?
  2. Should a risk assessment process be required to take into account additional or different criteria or risks than those listed in the proposed rule?
  3. Should financial institutions be required to update their risk assessment using the process proposed in the rule, at a regular, specified interval (such as annually or every two years) or based on triggers such as the introduction of new products, services, distribution channels, customer categories, intermediaries or geographies?
  4. The proposed rule would require financial institutions to consider the reports they file pursuant to 31 CFR Chapter X as a component of the risk assessment process.  To what extent do financial institutions currently leverage Bank Secrecy Act reporting to identify and assess risk?  Are there additional factors that should be considered with regard to this proposed requirement?

Written comments on the proposed rule, which can be found here, must be submitted to FinCEN on or before September 1, 2024.  If you have any questions concerning the above, please contact your attorney at Vedder Price or one of the authors.

On November 7, 2023, the Consumer Financial Protection Bureau (“CFPB”) proposed a rule that would allow the CFPB to supervise certain large nonbank companies that provide consumer financial services such as digital wallets and payment applications. If enacted, it would subject large technology companies handling more than five million payment transactions per year—such as Apple, Meta and Alphabet—to CFPB supervisory examinations for the first time. Under the proposed rule, these large nonbank companies would have to adhere to certain funds transfer, privacy and other federal consumer financial protection laws, including protections against unfair, deceptive and abusive practices.

Continue Reading Proposed CFPB Rule Could Subject “Big Tech” Companies to Enhanced Regulatory Scrutiny

On October 24, 2023, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency (together, the “Agencies”) issued a final rule designed to modernize and fine tune the Community Reinvestment Act’s (“CRA”) implementing regulations. The Agencies believe that the final rule, which will mostly become applicable between January 1, 2026 and January 1, 2027, is designed to achieve four primary goals:

Continue Reading Final Rule Updating the Community Reinvestment Act Issued by Bank Regulators

On July 28, 2023, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the National Credit Union Administration (the “NCUA”) and the Office of the Comptroller of the Currency (together, the “Agencies”) issued an addendum to the Interagency Policy Statement on Funding and Liquidity Risks, originally published in the Federal Register on March 22, 2010 (available here), in response to the recent instances of banks failing in part due to severe liquidity issues earlier this year (the “Addendum”).  The Agencies’ release of the Addendum follows recent statements made by the Chair of the Federal Reserve, Jerome Powell, on July 26, 2023, urging “banks broadly” to be proactive and test more regularly in order to be in a position to expeditiously access the discount window should ever the need to do so arise.

Continue Reading Federal Regulators Issue Updated Guidance on Liquidity Risks and Contingency Planning

On July 27, 2023, in an effort to bolster the resilience of the U.S. banking system in the aftermath of recent bank failures and to promote consistency with international banking capital standards, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency (together, the “Agencies”) issued a notice of proposed rulemaking which would standardize the way large banks calculate risk-weighted assets and minimum capital requirements (the “NPRM”).  While the NPRM primarily applies to those banks with $100 billion or more in total consolidated assets (“Large Banks”), banks with total assets below the $100 billion threshold may still be affected if they have either (a) trading assets and trading liabilities at or above $5 billion or (b) trading assets and trading liabilities greater than or equal to ten percent (10%) of their total assets.

Continue Reading Federal Regulators Issue Notice of Proposed Rulemaking Revising Capital Requirements for Large Banks and Banks with Significant Trading Activity