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.

house models and coinsOn April 3, 2018, the Department of Treasury released recommendations to “modernize” the Community Reinvestment Act of 1977 (“CRA”). Treasury’s recommendations include:

 

  • updating the definitions of geographic assessment areas to reflect the changing nature of banking arising from changing technology, customer behavior, and other factors;
  • increasing clarity and flexibility of CRA examinations to increase transparency and effectiveness of CRA rating determinations;
  • improving the examination process to increase timeliness of evaluations and increasing accountability for banks’ planning of their CRA activity; and
  • incorporating performance incentives to better serve the CRA’s intended purpose of encouraging banks to meet the credit and deposit needs of their communities.

Click here to read an expanded synopsis of this topic.

payday loan pen and paperOn October 5, 2017, the Consumer Financial Protection Bureau (“CFPB”) released its nearly 1,700-page final rule for short-term loans (“Payday Lending Rule”). Notably, almost simultaneously with the CFPB’s announced Payday Lending Rule, the Office of the Comptroller of the Currency (“OCC”) rescinded its longstanding Guidance on Supervisory Concerns and Expectations Regarding Deposit Advance Products (“DAP Guidance”), theoretically opening the door for banks to offer short-term credit products to customers with less regulatory burden.

When will the Payday Lending Rule become effective?

While certain provisions of the Payday Lending Rule relating to the registration of information systems will become effective 60 days after the Payday Lending Rule is published in the Federal Register, the rest of the Payday Lending Rule will become effective 21 months after publication in the Federal Register. Consequently, the Payday Lending Rule will not become effective until sometime during the summer of 2019. Given that the term of the current CFPB Director expires in mid-2018, and will presumably be replaced by a director less hostile to the payday loan industry, some industry commentators speculate that the Payday Lending Rule, at least in its present form, may never become effective. Continue Reading The CFPB’s Payday Lending Rule: An Opportunity in Disguise?

Here are our observations on the 2018 OCC Bank Supervision Operating Plan:

– Cybersecurity is a top priority.

– Credit underwriting, as always.

– BSA is frequently mentioned.

– Business model sustainability and change management are emphasizing the M in CAMELS.

– Fair lending is far down the list.

Click here for the OCC press release.