On July 11, 2018, the Office of the Comptroller of the Currency (“OCC”), the Federal Deposit Insurance Corporation (“FDIC”) and the Board of Governors of the Federal Reserve System (“FRB”) (the OCC, FRB and FDIC are collectively, the “Federal Banking Agencies”) issued revisions to the Interagency Biographical and Financial Report (the “Report”).

In general, individual directors, officers, or an individual or group of shareholders acting in concert that will own or control 10 percent (10%) or more of a bank must file the Report in connection with the following: (i) applications to establish a de novo bank, (ii) notices for a change in control, (iii) Section 914 applications for new executive officers and directors, and (iv) applications for new executive officers and directors following a change in control.

Continue Reading Bringing a Level of Clarity to the Interagency Biographical and Financial Report

On May 22, 2018, the House of Representatives passed the bipartisan Economic Growth, Regulatory Relief and Consumer Protection Act (S. 2155) (the “Consumer Protection Act”), which had been previously passed by the Senate. The Consumer Protection Act will now be sent to President Trump who is expected to sign it into law in the coming weeks.

The Consumer Protection Act becomes the first legislatively enacted regulatory relief bill since the recession, and rolls back various Dodd-Frank Act provisions.  Below we provide a brief summary of some of the Consumer Protection Act’s major provisions.

Capital Simplification for Qualifying Community Banks. The federal banking agencies would be directed to initiate the rulemaking process to develop a “Community Bank Leverage Ratio” of not less than 8 percent and not more than 10 percent for community banks and their holding companies with total consolidated assets of $10 billion or less. Any qualifying community bank or holding company that exceeds the Community Bank Leverage Ratio will be considered well-capitalized.  Qualifying banks that meet this ratio would not even have to calculate the various other capital ratios currently employed by the federal banking regulators (e.g., Total Risk-Based Capital Ratio, Common Equity Tier-1 Capital Ratio, or Tier-1 Risk-Based Capital Ratio). Continue Reading Update: Regulatory Relief Passed by Congress

Anti Money LaunderingOn May 11, 2018, compliance with the beneficial ownership rule became mandatory.  In accordance with the rule, a covered financial institution must verify, at the time a new account is opened, the beneficial owners opening the account on behalf of a legal entity customer.  For purposes of the rule, any rollover or renewal of an existing account is deemed to be an opening of a “new” account.  Despite the clarity of the regulation, many financial institutions are not certain how they are to comply with the beneficial ownership requirements when many renewals of loan accounts and rollovers of certificates of deposit (CDs) are automated.

Continue Reading BSA/AML ALERT: FinCEN Grants a 90-Day Exemption from the Beneficial Ownership Rule for Certain Financial Product Renewals and Rollovers

On May 11, 2018, the beneficial ownership rule became fully effective.  While the rule was finalized on July 16, 2016, compliance was not mandatory until May 11, 2018.  The delay in implementation was to permit covered financial institutions to ready their BSA/AML compliance programs.

In accordance with the rule, a covered financial institution must verify, at the time a new account (loans, deposits, etc.) is opened, the beneficial owners opening the account on behalf of a legal entity customer.  If there are multiple layers of legal entities, the covered financial institution is required to look through each layer to identify the beneficial owners.

A “beneficial owner” is defined as any natural person who (i) owns 25 percent or more of a legal entity and (ii) controls the legal entity.  The covered financial institution must identify at least one beneficial owner who owns 25 percent or more of the legal entity, but is limited to naming a total of four natural persons.  There is no such limitation for beneficial owners that may control the legal entity customer.

Click here to read the public announcement issued by the Financial Crimes Enforcement Network (FinCEN) on the beneficial ownership rule.

After a 10 day jury trial, a jury found U.S. Bancorp liable for almost $3.3 million in damages for infringing upon a patent covering check-processing technology owned by Solutran, Inc. (”Solutran”). Solutran’s U.S. Patent No. 8,311,945 covers a method for processing paper checks whereby data regarding a transaction captured at a merchant’s point of purchase is later matched against a scanned image of a check at a remote location.  The jury rejected U.S. Bancorp’s argument that the patent was obvious based on prior art, and found that almost 100 million of the bank’s transactions had infringed on Solutran’s patent.

The U.S. Bancorp case should serve as notice to both service providers and banks. Service providers and banks who process paper checks should confirm they are not infringing on Solutran’s patented method to avoid potentially significant liability.  Banks that rely on third parties for check processing should review their contracts with service providers to ensure that proper indemnification language is included in the governing agreements.