FinCEN intends to finalize two rules: the residential real estate transaction reporting rule and anti-money laundering/suspicious activity report requirements for investment advisers rule. FinCEN also announced its intent to continue work on amendments to the definition of broker or dealer in securities, rule regarding commercial real estate transaction reports and records, and the pilot program on sharing information related to SARs within a “financial group” as authorized under the ALM Act.

Notably, FinCEN still plans to amend the travel rule related to card verification code and digital assets with legal tender status, potentially reducing the reporting threshold to $250, but FinCEN has officially withdrawn the unhosted wallet rule.

VIEW AGENDA

source: ABA Daily Newsbytes, August 27, 2024

When it comes to mergers, Bowman said that bankers and bank regulators are “living in different worlds.” Bankers seek to conclude the process in a timely way, with a lack of timely regulatory action a key risk.

“In contrast, some regulators feel pressure to revisit well-established regulatory approval standards relating to statutory factors, such as the effect of a transaction on competition, or to even expand the use of M&A review to accomplish other objectives, like forcing banks to adopt regulatory standards that would not otherwise apply by regulation as a condition of approval,” Bowman said.

Bowman countered arguments that regulators “rubber stamp” proposed mergers. “Federal Reserve data support the view that even for the self-selected population who files an application, the process does not always lead to approval,” she said. “To the contrary, based on the most recent data reported for 2023, a significant portion of M&A applications were withdrawn before approval, and the average processing time in the second half of 2023 was 87 days.  The number of approved M&A transactions was also significantly lower in 2023 than it was in 2020, 2021 or 2022.”

As for bank liquidity regulation, Bowman was skeptical of a proposal to require banks to preposition collateral at the Fed’s discount window, saying its benefits “remain to be seen.” However, other reforms, such as encouraging bank readiness to borrow from the discount window if that is part of banks’ contingency funding plans, could be explored more thoroughly, she said.

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source: ABA Daily Newsbytes, August 13, 2024

Despite advancements in deepfake technology, compromised business email remained the most likely avenue for payment fraud, with 42% of organizations saying they were defrauded through email schemes. Social engineering (19%) and employee collusion (16%) were also top causes of fraud. Most respondents said they didn’t know how much their organizations lost to fraud, although roughly 21% said there were no losses while 18% said it was under $500,000. Less than 10% reported losing more than $500,000.

VIEW SURVEY

source: ABA Daily Newsbytes, August 6, 2024

The Treasury Department last year released a report that identified gaps in the financial services sector’s adoption of cloud services. One outcome of that report was the launch of a private-public partnership with the Financial Services Sector Coordinating Council, or FSSCC, a nonprofit financial services industry group. During a joint FSSCC-Treasury presentation, council vice chair and American Bankers EVP Paul Benda said that FSSCC developed three new resources through the collaboration.

“These are resources that financial institutions of all sizes can use today to enhance their resilience and provide [cloud services providers] a detailed overview of regulatory expectations that their financial institution customers must meet,” Benda said.

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source: ABA Daily Newsbytes, July 18, 2024

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source: ABA Daily Newsbytes, July 8, 2024

‌Read the article

Listen to Mitchell on the ABA Banking Journal Podcast

source: ABA Daily Newsbytes, July 8, 2024

Read the survey results

source: ABA Daily Newsbytes, July 3, 2024

A total of 1,208 insured U.S. national and state commercial banks and savings associations held derivatives, the OCC said. Four large banks held 87.6% of the total banking industry notional amount of derivatives. Derivative notional amounts increased in the first quarter of 2024 by $13.6 trillion or 7.1% to $206.1 trillion.

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source: ABA Daily Newsbytes, June 26, 2024

A total of 1,208 insured U.S. national and state commercial banks and savings associations held derivatives, the OCC said. Four large banks held 87.6% of the total banking industry notional amount of derivatives. Derivative notional amounts increased in the first quarter of 2024 by $13.6 trillion or 7.1% to $206.1 trillion.

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source: ABA Daily Newsbytes, June 26, 2024

The CFPB also announced that it does not intend to assess penalties for reporting errors for the first 12 months of collection. It intends to conduct examinations only to assist lenders in diagnosing compliance weaknesses, “so long as lenders engage in good faith compliance efforts.”

A federal court in Texas last year stayed the rule in a lawsuit filed by the Texas Bankers Association, ABA and others challenging the regulation, ruling that the CFPB could not enforce it until the U.S. Supreme Court decided on the constitutionality of the bureau’s funding structure in a separate case. The high court upheld the CFPB’s funding earlier this year. The Texas court also ruled that the CFPB must extend the rule’s compliance deadlines to compensate for the period stayed.

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source: ABA Daily Newsbytes, June 26, 2024

Three financial technology sector associations sued Colorado earlier this year after the state legislature passed a law opting out of the federal Depository Institutions Deregulation and Monetary Control Act, allowing the state to establish restrictions on loans made by state-chartered banks. Colorado argues that its restrictions on rates and fees applied not only to banks charted in the state, but those chartered in other states. U.S. District Court Judge Daniel Domenico sided with the plaintiffs in a lawsuit, ruling that under federal law, the determination of where a loan is made depends on where the lender performs its loan-making functions and not the borrower’s location.

ABA and the Consumer Bankers Association filed an amicus brief in May in support of the lawsuit, saying that the law creates massive uncertainty for all federally insured depository institutions by subjecting them to multiple and inconsistent state laws. They also said the law would place state-chartered banks at a “severe disadvantage” with federally chartered institutions when lending.

Read the ruling

Read more about the amicus brief

source: ABA Daily Newsbytes, June 25, 2024

The Fed last year proposed revising Regulation II to lower the cap from its current rate of 21 cents and .05% of the transaction, plus a one-cent fraud adjustment, to 14.4 cents and .04% per transaction and a 1.3 cents fraud-prevention adjustment, effective June 30, 2025. It also proposed to update the cap every other year going forward by linking it to data from the board’s biennial survey of large debit card issuers.

In a letter to Budd, ABA and the other associations called the Fed proposal misguided, noting that interchange fees fund the technology upgrades, fraud prevention tools and zero liability that retail customers expect. They also noted that fees help fund low-cost Bank On accounts, which have brought millions of Americans into the banking system. More than a dozen groups have written to the Fed to express concern that the proposal could harm Bank On offerings.

“Nothing compels the Fed to revisit the interchange cap, and Congress directed the Fed to consider the negative effects the proposal would have on financial institutions and their customers, particularly low-and-moderate income consumers,” the associations said. “The overwhelming opposition to the rule from small financial institutions, community groups, think tanks and academics focused on financial inclusion validates the directive from Congress and makes the need for further consideration clear.”

Read the letter

Learn more about the Secure Payments Act

Ask your senators to support the Reg II stop-and-study bill

Read the proposed rule

source: ABA Daily Newsbytes, June 12, 2024

The results come from a larger survey of CEO attitudes about AI across multiple business sectors. Zeroing in on the financial services sector, the survey found that 66% of CEOs were willing to accept the risks associated with AI for the potential competitive benefits. At the same time, 65% said that succeeding with AI will depend more on people's adoption than the technology itself, while 60% recognize they are pushing for AI adoption more quickly than some of their employees might find comfortable.

More than half (57%) of financial services CEOs said that gaining a competitive advantage in the sector will depend on who has the most advanced generative AI. Half of respondents said they are hiring for generative AI-related roles that did not exist last year, and 53% indicate they are struggling to fill key technology positions. 

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source: ABA Daily Newsbytes, June 10, 2024

‌More than 85% of investigations that IRS-Criminal Investigation recommended for prosecution over the past two years concerned a primary subject with a related BSA filing, according to the report. Nearly 14% of all IRS-CI investigations in FY 2023 originated from BSA data. At the same time, more than 15% of active FBI investigations were linked to SARs and CTRs. Regarding the type of activity reported in SARs, approximately 1.75 million reports related to fraud, 1.63 million related to money laundering and 1.31 million related to structuring, although the largest category was “other suspicious activity” potentially identified by financial institutions at 3.17 million reports. 

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source: ABA Daily Newsbytes, June 10, 2024

“I believe we can do better and truly put consumers front and center by measuring their financial health and supporting their efforts to improve it,” Hsu said during a speech at a financial health conference in Chicago.

The report defines financial health as stability in day-to-day finances, resilience to withstand and recover from financial shocks, and security for the future. Hsu said banks can promote financial health by better aligning their product offerings to meet customer needs; by enhancing their customer relationships through offerings such as helping depositors pay their bills on time; and by supporting the mental well-being of their customers and communities. The report makes several specific recommendations, such as offering low- or no-cost transaction accounts, including Bank On accounts. However, it also calls for banks to eliminate fees for overdraft services—a policy priority for the current administration. 

Read the report

Read Hsu’s remarks

source: ABA Daily Newsbytes, June 7, 2024

The request was released the same day the Financial Stability Oversight Council and Brookings Institution kicked off a two-day conference on AI and financial stability. In opening remarks at the conference, Treasury Secretary Janet Yellen said federal regulators are not “seeking to reinvent the wheel” when addressing AI risks. “That said, there are also new issues to confront, and this is a rapidly evolving field,” she said. “We have our work cut out for us and are pursuing a variety of initiatives to identify and address emerging risks.”

In a statement, ABA President and CEO Rob Nichols said that U.S. banks are leaders in the responsible and innovative use of AI. “Banks deploy AI applications in a mature governance framework and are examined for compliance in areas including model risk, third party risk, consumer protection, and safety and soundness,” he said. Nichols added that ABA looks forward to responding to the request for information and has already worked closely with the department on AI issues. He also noted that the association has provided substantial feedback to the National Institute of Standards and Technology as it updates its AI Risk Management Framework. To join ABA’s AI working group, contact ABA’s Ryan Miller.

Read the request for information

Read Yellen’s remarks

Read Nichols’ statement

sources: Consumer Bankers Association SmartBrief and ABA Daily Newsbytes - June 7, 2024

The CFPB is currently in the process of finalizing the remaining portions of its proposed rulemaking to address electronic access to financial data by consumers and their agents. As part of the upcoming implementation, the CFPB expects to allow companies to use technical standards developed by standard-setting organizations recognized by the bureau. “Today’s rule kicks off the process for standard-setting organizations to seek formal recognition,” the CFPB said.

The rule also includes a mechanism for the CFPB to revoke the recognition of standard setters and a maximum recognition duration of five years, after which recognized standard setters will have to apply for re-recognition, according to the bureau. It also contains a “step-by-step” guide on the process to receive CFPB recognition, including contingent recognition with feedback from the bureau on necessary changes. There are also provisions on how loss of recognized status will be treated, a situation flagged by ABA.

Read the rule

Read the guide

Join the ABA 1033/Data Aggregation Working Group by contacting ABA’s Ryan Miller

source: ABA Daily Newsbytes, June 6, 2024

‌“The opacity shrouding CU bank buys merits further consideration given the potential ramifications for bank customers, credit union members and the communities where these depository institutions operate,” according to the blog post. “Local jurisdictions lose Community Reinvestment Act and tax dollars when credit unions purchase banks and without a membership vote, credit union members have no say in their monies being spent on banks. As these tie-ups increase in number and volume, more public officials should direct their attention to these issues.”

State regulators in Colorado, Iowa, Minnesota and Nebraska have clarified that credit unions do not have the authority to acquire banks under state law, and more recently, the Tennessee Bankers Association championed a new state law clarifying that only FDIC-insured entities may acquire state-chartered banks. “With a price tag likely set at hundreds of millions, the lack of transparency around credit unions’ bank acquisitions is alarming,” the blog post states. “The fact that credit unions are not subject to reporting requirements under the CRA raises real questions about the impact of this deal on local communities.”

Read more

Contact your lawmakers to urge them to reform credit unions

source: ABA Daily Newsbytes, June 4, 2024

Roughly a third of respondent sites with banking partners met their partners through an event or network, such as Bank On coalitions or local community organizations, according to the survey. About a quarter of sites formed their partnerships because of an initiative of the partner bank or credit union. Roughly two in three VITA sites were willing to direct unbanked clients to financial institutions with Bank On accounts, regardless of whether the sites had existing banking partnerships.

The FDIC also asked VITA sites what practices were most useful for helping clients open bank accounts. Around 71% of locations that used on-site phones, virtual conferences, mobile apps or paper forms described the practice as “very useful.” Eighty-six percent of sites that use referrals, and 85% that used alternative methods such as government or trusted websites, described the practice as very useful.

Read more

Learn more about the Bank On initiative

source: ABA Daily Newsbytes, June 3, 2024

A 13.3% decline in noninterest expense was the primary cause for the rise in net income, the FDIC said. That drop was driven by a decline in the expense related to the special assessment to recover the loss to the Deposit Insurance Fund resulting from the agency’s decision to protect uninsured depositors following the Silicon Valley Bank and Signature Bank failures. Higher noninterest income and lower provision expenses also contributed to the increase in net income.

Quarterly net income for the 4,128 community banks insured by the FDIC was $6.3 billion in Q1, an increase of $363.2 million or 6.1% from the previous quarter, the agency said. Lower realized losses on the sale of securities, and lower noninterest and provision expenses, offset lower noninterest and net interest income, it added.

Domestic deposits increased $190.7 billion or 1.1% in Q1, marking a second consecutive quarterly increase. Estimated insured deposits increased $114.9 billion or 1.1% while estimated uninsured domestic deposits increased $63.3 billion or 0.9%. The DIF balance increased $3.5 billion to $125.3 billion, primarily driven by assessment revenue. The reserve ratio increased two basis points to 1.17%.

The total number of FDIC-insured institutions declined by 19 during the quarter to 4,568, the FDIC said. One bank opened, four banks did not file a Call Report and 16 institutions merged with other banks.

Read more

source: ABA Daily Newsbytes, May 30, 2024

Most military families cited low fees (58.6%) as the banking service most important to them, with respondents allowed to choose more than one answer. Other important services included customer service (54.5%), online banking (51%), interest rates (50%), branch accessibility (48%), comprehensive product offerings (21%) and ATM fee rebates (15%). At the same time, 39% of respondents said they would find financial education the most helpful in preparing for their financial future, although 35% were unsure what they could do to prepare.

Read the survey

source: ABA Daily Newsbytes, May 24, 2024

Twenty-three percent of adults with incomes below $25,000 were unbanked compared with 1% of adults with incomes of $100,000 or more, according to the Fed. Fourteen percent of Black adults and 11% of Hispanic adults were unbanked, compared to 4% each for white and Asian adults. Eleven percent of adults with a disability were unbanked, compared to 5% without disabilities.

Banked and unbanked adults used nonbank providers to conduct financial transactions, but the unbanked were much more likely to have done so, the report concluded. Twelve percent of banked adults used a nonbank money order or check cashing service, compared with 33% of unbanked adults. The Fed also found that 7% of adults held or used cryptocurrency last year, down three percentage points from 2022 and five percentage points from 2021. 

Read the report

Read a fact sheet on the report

source: ABA Daily Newsbytes, May 22, 2024

In a letter, ABA noted that attacks against ATMs have increased in recent years and will continue if criminals view the machines as easy targets with a low risk of prosecution. The association also said that as banks have increased their defenses to protect ATMs from attack, criminals have increasingly targeted the people who service the machines.

“By encouraging the prosecution of these crimes and enforcing the same penalties as bank robberies, we hope that individuals at ATMs and the ATMs themselves will be less attractive targets for crime,” ABA said.

Read the letter

View the legislation

source: ABA Daily Newsbytes, May 15, 2024

In joint comments, the associations said the rule poses a direct threat to the financial security of millions of America’s workers and retirees, with a disproportionate impact on low- and middle-income workers. A similar DOL fiduciary rule in 2016 resulted in more than 10 million small-retirement account owners—with more than $900 billion in savings—losing access to their financial professionals, they said. In addition, the new rule is estimated to increase the wealth gap by reducing projected individual retirement account balances of Black and Hispanic Americans by 20% over 10 years.

The associations also said the rule is unnecessary in light of existing federal and state rules; that it undermines the intent of Congress in passing the Secure Act and Secure 2.0, which sought to strengthen retirement systems; and that the DOL’s rulemaking process was rushed and dismissive of public input. “Given the DOL’s blatant disregard for the limitations on its authority as established by Congress and the federal courts, Congress would clearly be justified in passing the CRA resolutions to disapprove the final rule,” they said.

Read the House letter

Read the Senate letter

source: ABA Daily Newsbytes, May 16, 2024