February 7, 2024

The Department of the Treasury (Treasury) published the 2024 National Risk Assessments on Money Laundering, Terrorist Financing, and Proliferation Financing. These reports highlight the most significant illicit finance threats, vulnerabilities, and risks facing the United States. The reports discuss the ongoing fentanyl crisis, foreign and domestic terrorist attacks and related financing, increased potency of ransomware attacks, the growth of professional money laundering, the continued digitization of payments and financial services, and the use of digital assets for terrorist financing.

Read the 2024 National Money Laundering Risk Assessment here
Read the 2024 National Terrorist Financing Risk Assessment here
Read the 2024 National Proliferation Financing Risk Assessment here

The U.S.-UK Financial Regulatory Working Group held its ninth official meeting in London on January 31, 2024. Officials and senior staff from HM Treasury and the U.S. Department of the Treasury were joined by representatives from independent regulatory agencies, including the Bank of England, Financial Conduct Authority, Federal Reserve Board (FRB), Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), and Securities and Exchange Commission (SEC). The Working Group meeting focused on several key themes, including the economic and financial stability outlook, banking issues, developments in the non-bank sector, climate-related financial risks and sustainable finance, digital finance, cross border regimes, and operational resilience. Participants also discussed the importance of effective regulation and oversight of crypto assets and markets and reiterated their support for the international work on crypto assets.

The FRB, FDIC, and the OCC  announced their first in a series of requests for comment to reduce regulatory burden under the Economic Growth and Regulatory Paperwork Reduction Act. To facilitate this review, the agencies divided their regulations into 12 categories and are first soliciting comments on their regulations in three categories: Applications and Reporting, Powers and Activities, and International Operations. Comments on the relevant regulations will be accepted for 90 days after publication in the Federal Register. Comments are due by May 6, 2024.

Read FRB Governor Bowman’s statement here.

FRB Governor Michelle Bowman delivered remarks on the future of banking at the 157th Assembly for Bank Directors, at the Southwestern Graduate School of Banking in Maui, Hawaii. Governor Bowman discussed how the past can inform the dynamics that bank leadership must consider in running their banks and that regulators should consider as they regulate and supervise institutions.

FRB Governor Bowman delivered remarks on supporting entrepreneurship and small businesses at the Uneven Outcomes in the Labor Market Conference in Washington, D.C.. Governor Bowman discussed the mandate for maximum employment, recent trends in small business, and Fed support for access to capital for small businesses.

FRB Governor Adriana Kugler delivered remarks on the outlook for economy and monetary policy at the Brookings Institution in Washington, DC. Governor Kugler discussed recent economic developments in the U.S., how she approaches the dual mandate, how she views the current state of monetary policy.

The American Bankers Association, the U.S. Chamber of Commerce, and five national and state associations sued the FRB, FDIC, and OCC for allegedly exceeding their statutory authority with their recent amendments to final rules implementing the Community Reinvestment Act. In a lawsuit filed in the Northern District of Texas, the groups asked the court to vacate the rules. They also will seek a preliminary injunction pausing the new rules while the court decides the merits of the case.

The American Fintech Council sent a letter to the Consumer Financial Protection Bureau (CFPB) calling for federal regulations on earned-wage access because states are taking contradictory approaches, with some treating the products as a loan and others not. The letter states that the differences between states are stark, resulting in a “patchwork approach” that is making it hard for companies to operate nationwide. 

A group of student loan debt relief businesses will be permanently banned from the debt relief industry and will be required to turn over their assets as part of a settlement with the Federal Trade Commission (FTC). According to the FTC’s August 2023 complaint, since at least 2019, Express Enrollment LLC (also doing business as SLFD Processing), Intercontinental Solutions LLC (also doing business as Apex Doc Processing LLC), and their operators Marco Manzi, Ivan Esquivel, and Robert Kissinger falsely claimed to be affiliated with the U.S. Department of Education and used “Biden Loan Forgiveness” or some similar name, which consumers have understood to refer to the Biden-Harris Administration’s Student Loan Debt Relief Plan, to lure students into signing up for their phony student debt relief scheme. The FTC charged that the scheme’s operators collected approximately $8.8 million in junk fees in exchange for student loan debt relief services that did not exist.

The Securities and Exchange Commission (SEC) adopted two rules that require market participants who engage in certain dealer roles, in particular those who take on significant liquidity-providing roles in the markets, to register with the SEC, become members of a self-regulatory organization (SRO), and comply with federal securities laws and regulatory obligations. The final rules, Exchange Act Rules 3a5-4 and 3a44-2, further define the phrase “as a part of a regular business” in Sections 3(a)(5) and 3(a)(44) of the Securities Exchange Act of 1934 to identify certain activities that would cause persons engaging in such activities to be “dealers” or “government securities dealers” and be subject to the registration requirements of Sections 15 and 15C of the Act, respectively, in connection with certain liquidity-providing roles.

Read SEC Chair Gary Gensler’s statement on the rules here.
Read SEC Commissioner Hester Peirce’s statement here.
Read SEC Commissioner Caroline Crenshaw’s statement here.
Read SEC Commissioner Uyeda’s statement here.
Read SEC Commissioner Jaime Lizárraga’s statement here.

The SEC announced charges against TradeStation Crypto, Inc., based in Plantation, Florida, for failing to register the offer and sale of a crypto lending product that allowed U.S. investors to deposit or purchase crypto assets in a TradeStation account in exchange for the company’s promise to pay interest. To settle the SEC’s charges, TradeStation agreed to pay a $1.5 million penalty.

The SEC announced settled accounting fraud charges against Cloopen Group Holding Limited, a China-based provider of cloud communications products and services whose American depositary shares formerly traded on the New York Stock Exchange. The SEC determined not to impose civil penalties against Cloopen because the company self-reported its accounting issues, cooperated extensively with the staff’s investigation, and undertook prompt remedial measures.

House Financial Services Committee Chairman Patrick McHenry (R-NC) and  Financial Institutions and Monetary Policy Subcommittee Chairman Andy Barr (R-KY) sent letters to Federal Reserve Bank of San Francisco President Mary Daly and Federal Reserve Bank of New York President John Williams regarding their banks’ ongoing relationships with global governance organizations that they described as opaque and unaccountable, including the Network for Greening the Financial System (NGFS) and Bank of International Settlements (BIS). The lawmakers are requesting information related to the Federal Reserve (Fed) regional banks’ past work and written agreements with these organizations. Read the letter to President Daly here and President Williams here.

House Financial Services Committee Chairman Patrick McHenry; Digital Assets, Financial Technology and Inclusion Subcommittee Chairman French Hill (R-AR); House Agriculture Committee Chairman Glenn Thomson (R-PA); and Commodity Markets, Digital Assets, and Rural Development Subcommittee Chairman Dusty Johnson (R-SD) sent a letter to Treasury Secretary Janet Yellen in her capacity as Chair of the Financial Stability Oversight Council (FSOC) demanding answers on FSOC’s calls to fill existing regulatory gaps in the spot market for digital assets that are not securities.

Senator Sherrod Brown (D-OH), Chairman of the Senate Committee on Banking, Housing, and Urban Affairs, along with Senators Jack Reed (D-RI), Bob Menendez (D-NJ), and Mark Warner (D-VA) urged President Joe Biden to increase funding for export control administration and enforcement. In a letter to the President, the Senators emphasized the Bureau of Industry and Security’s (BIS) importance to national security policy, citing comments from key administration officials. The Senators stated that ramping up BIS’s funding will allow the Bureau to strengthen export control rules and enforcement to safeguard sensitive U.S. technology and protect national security.

The Senate Banking Committee Subcommittee on Housing, Transportation, and Community Development held a hearing to discuss how artificial intelligence (AI) can be better regulated within the American housing and credit markets. Read our summary here.

The House Committee on Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing discussing how the U.S. can improve its strategic economic competition with China and hinder its economic development of critical industries. Read our summary here.

The House Financial Services Committee Subcommittee on Financial Institutions and Monetary Policy held a hearing discussing current Federal banking proposals under the Biden administration. Read our summary here.

The Senate Banking Committee held a hearing discussing fraud in the banking system, which touched on AI, P2P platforms, and recent CFPB proposals. Read our summary here.

Chairman of the House Financial Services Committee, Patrick McHenry (R-NC), Chairman of the Financial Institutions and Monetary Policy Subcommittee, Andy Barr (R-KY), and Chairman of the Digital Assets, Financial Technology and Inclusion Subcommittee, French Hill (R-AR) sent a letter to Federal Deposit Insurance Corporation (FDIC) Chair Martin Gruenberg expressing concern over the agency’s “efforts to minimize engagement with the public on financial technology and innovation”. The lawmakers note the dismantling of the external facing portion of the agency’s FDITech Office as a catalyst for their inquiry and demand information regarding how the FDIC will provide regulatory guidance for burgeoning FinTech firms and financial innovators moving forward.

Need to catch up on what happened last week? Check out our February 2nd End of Week Wrap Up here