December 8, 2023

Senators Mark Warner (D-VA), Mitt Romney (R-UT), Mike Rounds (R-SD), and Jack Reed (D-RI) introduced the Terrorist Financing Prevention Act of 2023. The bill expands the Treasury Department’s (Treasury) authorities to impose sanctions on foreign financial institutions and foreign digital asset transaction facilitators that knowingly facilitate transactions for foreign terrorist organizations and others. It also amends the Bank Secrecy Act (BSA) by authorizing the Treasury Secretary to prohibit or impose conditions on certain transmittals of funds. The bill concludes by authorizing appropriations needed to carry out the Act. This legislation comes one week after the Treasury wrote to Congress seeking new sanctions tools to target digital asset platforms that facilitate payments to terrorist groups and closing legal and regulatory gaps for financial institutions and off-shore platforms with respect to BSA and sanctions authorities. Read the text of the bill here.

The Office of the Comptroller of the Currency (OCC) published their Semiannual Risk Perspective for Fall 2023, which reports the key issues facing the federal banking system. The OCC reported that the overall strength of the federal banking system remains sound. The OCC expects banks to remain diligent and adhere to prudent risk management practices across all risk areas. Banks should continue to guard against complacency to ensure they maintain the ability to withstand potential future economic challenges. The OCC also highlighted credit, market, operational, and compliance risks, as the key risk themes in the report. 

The Financial Stability Oversight Council (FSOC) will meet on December 14 to discuss an update on the Council’s Nonbank Mortgage Servicing Task Force; an update on the Council’s Hedge Fund Working Group; an update on the Council’s Climate-related Financial Risk Committee; and an update on cybersecurity developments. The preliminary agenda for the public session includes the Council’s 2023 annual report.

The Treasury Department Community Development Financial Institutions Fund (CDFI Fund) released a revised CDFI Certification Application that “reflects the evolution of the community finance field, provides greater clarity about what it means to be a CDFI, and incorporates extensive feedback from community finance practitioners.”

Deputy Secretary of the Treasury Wally Adeyemo delivered remarks before the Treasury Advisory Committee on Racial Equity. Deputy Secretary Adeyemo discussed the Treasury Department’s work in the broader context of the Biden-Harris Administration’s Investing in America agenda, as well as the tools the Department has to advance equity in that context.

The Treasury Department released a statement following from the EU-U.S. Joint Financial Regulatory Forum that took place on December 4-5 that featured discussion around six themes: (1) market developments and financial stability; (2) regulatory developments in banking and insurance; (3) anti-money laundering and countering the financing of terrorism (AML/CFT); (4) sustainable finance; (5) regulatory and supervisory cooperation in capital markets; and (6) operational resilience and digital finance.

During its ninth annual Law Enforcement Awards Program, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) recognized agencies that used BSA data to successfully pursue and prosecute criminal investigations. The award-receiving cases can be found here.

The Consumer Financial Protection Bureau (CFPB) took action against Atlantic Union Bank for illegally enrolling thousands of customers in checking account overdraft programs. The CFPB found that Atlantic Union misled consumers who enrolled in this overdraft service by phone and failed to provide proper disclosures. The CFPB is ordering Atlantic Union to refund at least $5 million in illegal overdraft fees and pay a $1.2 million penalty to the CFPB’s victims relief fund.

Securities and Exchange Commission (SEC) Chair Gary Gensler delivered remarks entitled “They Are Merely the Agents” before the American Bar Association. Chair Gensler discussed rulemaking initiatives related to executive compensation, insider trading, proxy voting, and beneficial ownership.

The SEC’s Investor Advisory Committee met to examine the use of complex investment products and strategies by self-directed investors and discuss practical applications for enhancing financial literacy. 

Read Chair Gary Gensler’s remarks here.
Read Commissioner Hester Peirce’s remarks here.
Read Commissioner Jaime Lizárraga’s remarks here.

The Federal Deposit Insurance Corporation (FDIC) Board of Directors released its second semiannual update of 2023 on the Restoration Plan for the agency’s Deposit Insurance Fund (DIF). As of June 30, 2023, the DIF balance stood at $117.0 billion. Increased loss provisions, including for the bank failures that occurred in March and May, coupled with strong insured deposit growth, resulted in a decline in the reserve ratio from 1.25 percent as of December 31, 2022, to 1.10 percent as of June 30, 2023. Despite this decline, the FDIC projects that the reserve ratio is likely to reach the statutory minimum of 1.35 percent by the statutory deadline of September 30, 2028. Read FDIC Chairman Martin Gruenberg’s statement here.

The Office of Financial Research (OFR) published their 2023 Annual Report to Congress, which discusses their assessment of risks associated with the U.S. financial system and reviews the performance of the OFR. The report finds that financial-stability risks have increased since last year’s report and remain elevated in 2023. Multiple indicators signal an upcoming economic slowdown—potentially magnified by persistent inflation, ongoing geopolitical risks, and global conflicts.

House Small Business Committee Republicans, led by Chairman Roger Williams (R-TX), along with Reps. Dan Meuser (R-PA), Maria Salazar (R-FL), Jake Ellzey (R-TX), and Mark Alford (R-MO), visited the Small Business Administration (SBA) and met with Administrator Isabella Casillas Guzman. Rep. Williams stated that during the meeting, the Representatives “emphasized the need to hold fraudsters accountable and recoup the hundreds of billions of dollars stolen from the taxpayers through COVID-19 lending programs as well as other issues facing small businesses.”

Senate Banking Committee Ranking Member Tim Scott (R-SC) is leading fellow Committee Republicans in calling on FDIC Chairman Gruenberg to provide answers on allegations of sexual harassment at the FDIC, as well as to step down as Chairman and Board Member. Read the full letter here.

Senate Majority Whip Dick Durbin (D-IL), Chair of the Senate Judiciary Committee, urged the Senate to bring his Credit Card Competition Act, bipartisan legislation he introduced with U.S. Senator Roger Marshall, M.D. (R-KS), to the Senate floor for a vote. The Credit Card Competition Act would direct the Federal Reserve to ensure that the largest credit card-issuing banks offer a choice of at least two networks, one of which must be a network other than Visa and Mastercard, over which an electronic credit transaction may be processed.

New York Department of Financial Services Superintendent Adrienne Harris released a statement on a New York Supreme Court decision upholding modernized check cashing regulation. Superintendent Harris applauded the decision, stating that it is a win for New Yorkers who depend on check cashers to access their money. 

The Office of the Comptroller of the Currency (OCC) is issuing a bulletin to assist banks in effectively managing risks associated with “buy now, pay later” (BNPL) lending and in offering BNPL loans in a responsible manner. The bulletin provides background information on BNPL loans, discusses risks associated with BNPL lending, and provides guidance to banks offering or considering offering BNPL loans.

Many of the most impactful provisions in the House and the Senate restricting outbound investments to China and targeting the Chinese government or affiliated entities economically were not included in the National Defense Authorization Act (NDAA) this year; they will likely resurface during the consideration of the NDAA next year if not before, as part of other moving legislation. Read more in our latest Sanctions Watch here

Need to catch up on what happened earlier this week? Check out our December 6 Midweek Update here