The OCC, FDIC, and Federal Reserve Board have issued a guide that is intended to assist community banks in conducting due diligence when considering relationships with financial technology (fintech) companies (Guide).
The issuance of the Guide follows the agencies’ July 2021 release of proposed interagency guidance for banking organizations on managing risks associated with third-party
The Federal Reserve, FDIC, and OCC released on July 13, 2021 proposed guidance for banking organizations on managing risks associated with third-party relationships, including relationships with financial technology-focused entities such as bank/fintech sponsorship arrangements. The proposal is the first time that the three agencies have proposed third-party
On April 12, 2021, the Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (“Board”), the Federal Deposit Insurance Corporation (“FDIC”), the National Credit Union Administration (“NCUA”) and the Financial Crimes Enforcement Network (“FinCEN”) issued a Request for Information (“RFI”) requesting comment on the extent to which the agencies’ previous guidance on model risk management supports banks’ compliance with Bank Secrecy Act (“BSA) and Anti-Money Laundering (“AML”) regulations and Office of Foreign Asset Control (“OFAC”) requirements.
The RFI asks for comments from interested parties on suggested changes to guidance or regulations, and whether aspects of the agencies’ approaches to BSA/AML and OFAC compliance are either working well, or could be improved. The agencies explained that the reason for the RFI is to further understand current bank practices, and determine whether additional explanation or clarification of their guidance may be helpful. Although the genesis of the RFI is not entirely clear, it appears that it was issued in response to certain financial institution inquiries or comments regarding how the maintenance of their BSA/AML compliance programs should incorporate principles set forth in earlier, more general regulatory guidance on model risk management for banks, which we describe below. Further, the RFI has not occurred in a vacuum, but rather has appeared in the midst of a major, ongoing overhaul of the BSA/AML legislative, regulatory and enforcement regime. Comments to the RFI must be received by June 11, 2021.
Continue Reading Risk Management: Agencies Issue Request for Information on Intersection of Model Risk Management Guidance and BSA/AML Compliance
SARs Do Not Need to Be Filed At the First Sign of Potential ProblemsOn January 19, 2021, the Financial Crimes Enforcement Network (FinCEN), along with the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the National Credit Union Administration jointly published Answers to Frequently Asked Questions Regarding Suspicious Activity Reporting and Other Anti-Money Laundering Considerations. The agencies provided answers to certain frequently asked questions (FAQs) in an effort to (1) clarify for financial institutions the regulatory requirements related to Suspicious Activity Reports (SARs) that they must comply with; and (2) help financial institutions focus their resources on Bank Secrecy Act (BSA) reporting activities that provide the most value to law enforcement.
The banking agencies developed these FAQs in response to recommendations made by the Bank Secrecy Act Advisory Group, which are detailed in FinCEN’s Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness published in September 2020. Notably, the FAQs do not change existing legal obligations or create new regulatory requirements. Instead, they address several questions that have emerged among anti-money laundering compliance personnel. Generally, they are helpful and make clear that a decision to file a SAR in a particular case is driven by specific circumstances and good judgment, rather than a rigid “check the box” mentality.
Continue Reading FinCEN and Other Federal Banking Agencies Provide Much-Needed Guidance on Suspicious Activity Reports
On December 18, 2020, the Office of the Comptroller of the Current (OCC), Federal Reserve Board (FRB), and Federal Deposit Insurance Corporation (FDIC) announced an interagency notice of proposed rulemaking that would require supervised banking organizations to provide notification of significant computer security incidents to their primary federal regulator. Under the proposed rule, for incidents
On November 3rd, voters in Arizona, New Jersey, South Dakota, Montana, and Mississippi passed ballot measures to bring legal cannabis to each of their states. It’s not every year that we see states from opposite ends of the political spectrum agree on something with such vigor. In fact, loosening the laws surrounding cannabis—be it medical use, recreational use, or farming of hemp products—has consistently been one of the only areas receiving bipartisan support in a country divided on almost everything else.
The passage of these ballot measures means that the cannabis industry will generate even more revenue. Despite the massive dollar amounts currently associated with the cannabis industry, reliable banking services remain elusive, due to federal drug and money laundering laws and the Bank Secrecy Act (“BSA”). This post will summarize the recent cannabis legislation, and recap the main roadblocks facing the industry (and financial institutions) from a financial compliance perspective.
Continue Reading The State of Cannabis Affairs: New Legislation and a Regulatory Recap
We are pleased to offer the latest episode in Ballard Spahr’s Consumer Financial Monitor Podcast series — a weekly podcast focusing on the consumer finance issues that matter most, from new product development and emerging technologies to regulatory compliance and enforcement and the ramifications of private litigation. Following up on a recent blog post,
Regulators’ Joint Statement Attempts to Clarify AML Expectations Regarding Potential Corrupt ActorsOn August 21, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) and other banking regulators – specifically the Federal Reserve, the FDIC, the National Credit Union Administration, and the OCC – issued a joint statement that provides additional guidance in applying Bank Secrecy
Regulators Provide Greater Transparency into BSA/AML Enforcement ProcessOn August 13, 2020 the Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency (the “Agency” or collectively the “Agencies”) issued a joint statement updating and clarifying their 2007 guidance regarding how they evaluate enforcement actions when financial institutions violate or fail to meet BSA/AML requirements. The Financial Crimes Enforcement Network (“FinCEN”) followed with its own statement on August 18, 2020, setting forth its approach when considering enforcement actions against financial institutions that violate the BSA.
Below are a few highlights from the two sets of guidance:
All in all, the two statements, particularly the joint statement, succeed in providing greater transparency into the regulators’ decision-making processes with regards to pursuing enforcement actions for violations of the BSA and for AML program deficiencies.
Continue Reading Federal Banking Agencies Issue Joint Statement On Enforcement of BSA/AML Requirements; FinCEN Follows With Its Own
In the past month, the Government Accountability Office (“GAO”), a non-partisan legislative agency that monitors and audits government spending and operations, has issued a series of reports urging banking regulators and certain executive branch agencies to adopt recommendations related to trade-based money laundering (“TBML”) and derisking. These reports underscore (1) the importance of TBML as a key, although still inadequately measured, component of money laundering worldwide, and (2) that the GAO remains interested in assessing how banks’ regulatory concerns may be influencing their willingness to provide services.
Taken together, the GAO’s recent activity signals that even in the face of unprecedented public health and regulatory challenges posed by COVID-19, the GAO still expects banking regulators and agencies alike to fulfill its prior commitments on other, unrelated topics.