- Top Lines
The United States has taken significant measures in response to Russia’s further invasion of Ukraine. Highlights of these measures are below.
The leaders of the European Commission, France, Germany, Italy, the United Kingdom, Canada, and the United States issued a joint statement condemning Putin’s “war of choice” and attacks on Ukraine and imposing further restrictive economic measures on Russia. Specifically, the leaders committed to:
Ensuring that certain Russian banks are excluded from the SWIFT system, imposing restrictive measures that will prevent the Russian Central Bank from deploying its international reserves in ways that undermine the impact of the sanctions;
Taking measures to limit the sale of citizenship—so called golden passports—that let wealthy Russians connected to the Russian government become citizens of their countries and gain access to their financial systems;
Launching a transatlantic task force that will ensure the effective implementation of our financial sanctions by identifying and freezing the assets of sanctioned individuals and companies that exist within our jurisdictions;
Stepping up their coordination against disinformation and other forms of hybrid warfare.
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) and the U.S. Department of State sanctioned numerous Russian elites and their family members, identifying certain property of these persons as blocked, and sanctioning Russian intelligence-directed disinformation outlets.
The Biden administration is asking crypto exchanges to help ensure that Russian individuals and organizations aren’t using virtual currencies to avoid sanctions leveled on them by Washington. The White House’s National Security Council and the Treasury Department have sought help from operators of some of the largest trading platforms to thwart any attempts to sidestep the stiff restrictions levied by the U.S. and its allies.
We have developed a listserv to provide updates on these sanctions and related matters. To be included in the email distribution list, please email us at publicpolicyteam@fsvector.com.
- Weekly Wrap Up
During his testimony before Congress on March 2, Federal Reserve Chairman Jerome Powell addressed legislation pertaining to the illicit use of crypto in light of Russia sanctions. “Ultimately what’s needed is a framework in particular, ways to prevent these unbacked cryptocurrencies from serving as a vehicle for terrorist finance and general criminal behavior — tax avoidance and the like. That’s what I would say, but I don’t really know the extent to which it’s happening, but you read about it in the paper,” Powell said.
Senate Democrats, including Banking Chair Sherrod Brown of Ohio, Armed Services Chair Jack Reed of Rhode Island, Intelligence Chair Mark Warner of Virginia and Sen. Elizabeth Warren of Massachusetts sent a letter to Treasury Secretary Janet Yellen to clarify how the Office of Foreign Assets Control is ensuring that digital asset exchanges and decentralized finance platforms are complying with sanctions against Russia, as well as to request more information on what legal authorities or funding OFAC might need to assure crypto platforms aren’t helping sanctioned individuals to evade financial and economic restrictions.
The Federal Reserve updated its proposal for how it will evaluate applications by financial technology companies to gain access to the Fed’s payment rails. Building on a May 2021 request for comment that outlined key principles, the central bank is now proposing a three-tiered system for evaluating who should get a so-called Fed master account, a privilege usually reserved for banks that allows institutions to transfer money directly to another account holder. Comments will be accepted for 45 days after publication in the Federal Register.
The Consumer Financial Protection Bureau (CFPB) is considering ways to limit the inclusion of unpaid medical bills in consumer credit reports. Fifty-eight percent of the debt in collections reported on consumer credit reports stems from unmet medical bills, according to a report the bureau released. “Our long-term determination on whether it is appropriate for credit reporting agencies to include so-called medical debt on consumer credit reports will also be informed by additional research and analysis on medical billing collections and reporting,” said CFPB Director Rohit Chopra.
The Republican members of the Senate Banking Committee sent a letter to President Biden expressing concern regarding the nomination process of Sarah Bloom Raskin, nominee for Vice-Chair of the Supervision position on the Board of Governors of the Federal Reserve System. The members asked that the Chairman “de-link the other five nominees,” which they said was “rejected” by Chairman Brown. The letter concludes that “without greater insight into Ms. Raskin’s past activities, we cannot, in good faith, support the advancement of her nomination process.” The letter also includes a list of “Ms. Raskin’s obfuscations” and her “continual evasion and lack of candor about her time on the board of Reserve Trust.”
The IRS is considering more John Doe summonses on cryptocurrency exchanges as it expands scrutiny of digital assets, said Carolyn Schenck, national fraud counsel in the IRS Fraud Enforcement Program, during a webcast hosted by Tax Analysts. Three such information demands — which target a broad group of people instead of individual account holders — in the past several years have yielded the IRS information on crypto users with unreported holdings. The first, served in 2016 on the exchange Coinbase, opened up its books on some 13,000 account holders for the IRS to ferret out who was committing abusive activity.
U.S. Secretary of the Treasury Janet L. Yellen convened a meeting of the Financial Stability Oversight Council. During the meeting, the Council received an update from member agency staff on international market developments related to Russia’s unprovoked invasion of Ukraine. The Council noted that the U.S. financial system continues to function in an orderly manner. The Council will continue to monitor financial developments.
The U.S. Department of the Treasury issued the 2022 National Risk Assessments (NRAs) on Money Laundering (NMLRA), Terrorist Financing (NTFRA) and Proliferation Financing (NPFRA). These documents highlight the most significant illicit finance threats, vulnerabilities, and risks facing the United States. The documents can be found here.
U.S. Treasury Secretary Janet Yellen said her department will release a study by year-end on climate risks in the insurance industry and identify any gaps in regulation. Yellen said that the Treasury “is looking at climate-related risk in the insurance sector, trying to answer questions like whether climate-related weather events have impacted the availability of insurance coverage, especially in high-risk areas and for traditionally underserved communities.”
The U.S. Department of the Treasury announced in a press release that it has launched a historic demographic information collection effort to measure equity outcomes for small businesses supported by the State Small Business Credit Initiative (SSBCI) program. According to the press release, the information collected by the Treasury will support the program’s commitment to expanding access to capital for businesses owned and controlled by socially and economically disadvantaged individuals (SEDI businesses).
- ICYMI
The U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) imposed expansive economic measures, in partnership with allies and partners, that target the core infrastructure of the Russian financial system — including all of Russia’s largest financial institutions and the ability of state-owned and private entities to raise capital — and further bars Russia from the global financial system. The actions also target nearly 80 percent of all banking assets in Russia and will have a deep and long-lasting effect on the Russian economy and financial system.
The Federal Reserve has barred senior officials from a number of investment activities, particularly those involving individual stocks, bonds, cryptocurrencies and commodities. Notably, officials can still hold existing stocks, while crypto seems to be completely off-limits. There are exceptions for commodities and foreign currencies “owned for non investment purposes” but no such carve-out for crypto.
Federal Reserve Governor Lael Brainard spoke about central bank digital currencies (CBDCs). She stated that “a U.S. CBDC may be one potential way to ensure that people around the world who use the dollar can continue to rely on the strength and safety of US currency to transact and conduct business in the digital financial system.”
Canada’s federal government put 34 cryptocurrency wallet addresses on a list tied to the trucker “Freedom Convoy,” warning crypto exchanges and financial firms not to facilitate transactions with them as part of sanctions. The list consists of 29 Bitcoin wallet addresses, one Ethereum wallet address, one Cardano wallet address, one Ethereum Classic wallet address, one Litecoin wallet address and one Monero wallet address, according to the order.
- Upcoming Hearings & Events
Tuesday, March 8, at 10:00 AM EST: The U.S. Senate Committee on Banking, Housing, and Urban Affairs will hold a hearing entitled “Examining Mandatory Arbitration in Financial Service Products.”
Tuesday, March 8, at 10:00 AM EST: The U.S. House Committee on Financial Services will hold a hearing entitled “The Inflation Equation: Corporate Profiteering, Supply Chain Bottlenecks, and COVID-19.”
Thursday, March 10, at 10:30 AM EST: OMFIF will host a fireside chat with Wally Adeyamo, Deputy Secretary of the U.S. Treasury.