June 23, 2023

The Financial Action Task Force (FATF), a global anti-money laundering and countering the financing of terrorism (AML/CFT) standard setting body, stated, following this week’s plenary meeting, that almost 75 percent of jurisdictions are not in full compliance with its requirements for virtual assets. Further, more than half of jurisdictions surveyed have not taken any steps towards implementing the Travel Rule. The FATF will publish a report on June 27, urging countries to implement the FATF’s recommendations for virtual assets and virtual asset service providers.    

Earlier this month, the House Committee on Financial Services and Committee on Agriculture released a discussion draft of their joint digital asset market structure legislation. The text defines the jurisdictions of the U.S. Securities and Exchange Commission (SEC) and U.S. Commodity Futures Trading Commission (CFTC) regarding digital asset markets; distinguishes between various types of digital assets, including digital commodities; and requires the SEC and CFTC to create rules for registration and regulation of digital asset trading platforms. It also creates a path for digital asset issuers to sell tokens that are exempt from the federal securities laws. Read our summary of the legislation here.

Senate Majority Leader Chuck Schumer (D-NY) delivered remarks to launch the SAFE Innovation Framework for Artificial Intelligence (AI) at the Center for Strategic and International Studies (CSIS). In his remarks, Sen. Schumer outlined his vision for how the Senate can harness AI’s potential and protect society from its potential harms. See the one pager on the SAFE Innovation Framework here.

The House Financial Services Committee’s Republican Environmental, Social, and Governance (ESG) Working Group—led by Oversight and Investigations Subcommittee Chairman Bill Huizenga (R-MI)—released an interim report outlining the group’s efforts so far as well as key priorities going forward. 

House Science, Space, and Technology Committee Chairman Frank Lucas (R-OK) and House Oversight and Accountability Chairman James Comer (R-KY) sent a letter to the White House Office of Science and Technology Policy (OSTP) raising concerns about conflicting guidance from the Administration on AI.

The CFTC charged Cunwen Zhu and Justby International Auctions for fraudulently misappropriating over $1.3 million in customer funds intended for investment in digital asset and forex trading from 29 customers as part of a “pig butchering” romance scam. The CFTC is seeking restitution, disgorgement, civil monetary penalties, trading bans, and a permanent injunction against Zhu and Justby. 

The CFTC charged William Koo Ichioka with fraudulently soliciting and misappropriating over $21 million from over 100 commodity pool participants’ funds as part of a commodity pool investment scheme involving digital assets and forex trading. The CFTC is seeking restitution, civil monetary penalties, trading bans, and a permanent injunction against Ichioka. 

The Federal Trade Commission (FTC) filed an amicus brief in the U.S. Court of Appeals for the Seventh Circuit challenging a district court ruling that invalidated a key anti-discrimination rule in the Equal Credit Opportunity Act (ECOA). The case, CFPB v. Townstone Financial and Barry Sturner, relates to a Chicago-based mortgage lender and its owner, which the CFPB alleged violated Regulation B, the rule that implements ECOA. The CFPB alleged in the case that the defendants took steps to discourage Black consumers from applying for loans, violating Regulation B’s anti-discouragement rule. The district court ruled that the anti-discouragement provision was invalid and the ECOA protects only those consumers who have already applied for credit. In its amicus brief, the FTC argues that the district court’s ruling was incorrect. The FTC’s amicus brief notes that the anti-discouragement rule—which has stood for nearly 50 years—is authorized by the plain language of ECOA, which mandates that regulators further ECOA’s “purpose” and prevent its “evasion.”

A new U.S. task force comprising five federal enforcement agencies that regularly collaborate to investigate crypto and darknet crimes has been established, according to an announcement by the Department of Homeland Security. Dubbed the “Darknet Marketplace and Digital Currency Crimes Task Force,” the new interagency group will investigate how criminal gangs within Arizona use crypto and the dark web for crimes including drug trafficking, money laundering, personal data theft and child exploitation.

In a complaint, the FTC charged that Amazon has knowingly duped millions of consumers into unknowingly enrolling in Amazon Prime. Specifically, the FTC alleges that Amazon used manipulative, coercive, or deceptive user-interface designs known as “dark patterns” to trick consumers into enrolling in automatically renewing Prime subscriptions.

The Consumer Financial Protection Bureau (CFPB) released its annual report on the top financial concerns facing military families. The report highlights the growth of digital payment app usage in the servicemember community, the unique risks to servicemembers from these services, and the potential abuse from bad actors.

The CFPB published a response to an inquiry into automated worker surveillance by the White House Office of Science and Technology Policy. As part of the response, the CFPB is embarking on an inquiry into the data broker industry and issues raised by new technological developments. Among other things, the CFPB has requested information about the entities that purchase information, the harms from data broker practices, and the issues consumers face when they try to see and correct their personal information.

The Public Company Accounting Oversight Board (PCAOB) announced a settled disciplinary order sanctioning Marcum LLP (Marcum) for violations of PCAOB rules and quality control standards. The order imposes a $3 million civil money penalty on Marcum, which is in addition to the $10 million penalty imposed by the U.S. Securities and Exchange Commission (SEC) against Marcum in the Commission’s proceeding concerning related conduct. The PCAOB’s penalty is the largest it has imposed on a “non-affiliate firm,” meaning an audit firm that is not a member of a global network.

The CFPB issued two new reports on the financial opportunities and challenges facing Southern communities. The reports highlight gaps in banking access and consumer finance in Southern states and identify opportunities to improve financial outcomes for many Southerners. Read Banking and Credit Access in the Southern Region of the U.S. here and Consumer Finances in the Rural Southern Region here.

Congresswoman Maxine Waters (D-CA), Ranking Member of the House Financial Services Committee, reintroduced a legislative housing package aimed at tackling the affordable housing crisis.

The PCAOB released a Staff Spotlight suggesting questions that may be of interest to audit committee members to consider among themselves or in discussions with their independent auditors, particularly given today’s economic and geopolitical landscape.

The FDIC updated its Supervisory Guidance on Multiple Re-Presentment NSF Fees (FIL-40-2022) to clarify its supervisory approach for corrective action when a violation of law is identified.

The National Credit Union Administration (NCUA) Board held its sixth open meeting of 2023 and approved a proposal about the agency’s minority depository institution preservation program and a notice and request for comment on the NCUA operating fee schedule methodology. The NCUA Board also was briefed on efforts to modernize the chartering process for federal credit unions.

Federal Reserve Governor Christopher Waller delivered opening remarks at the 2023 International Journal of Central Banking Conference.

Deputy Secretary of the Treasury Wally Adeyemo delivered remarks at the Black Economic Alliance for Juneteenth. Deputy Secretary Adeyemo discussed economic gains for Black Americans over the last two-and-a-half years.

Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg delivered remarks on the Basel III Endgame at the Peterson Institute. Chairman Gruenberg discussed the Basel III capital framework.

SEC Commissioner Mark Uyeda delivered remarks at the Society for Corporate Governance 2023 National Conference. Commissioner Uyeda discussed rule 14a-8 and shareholder proposals, including current trends in shareholder proposals and policy approaches for consideration. 

The Senate Banking Committee voted to send the The Recovering Executive Compensation from Unaccountable Practices Act, the RECOUP Act, to the Senate floor. The bill, which is backed by Senate Banking Committee Chairman Sherrod Brown (D-OH) and Ranking Member Tim Scott (R-SC), would give regulators power to claw back compensation for executives of failed banks, institute penalties for misconduct, and direct banks to increase corporate governance.

The Senate Banking Committee and the House Financial Services Committee held hearings on the Consumer Financial Protection Bureau’s (CFPB) Semi-Annual Report. 

The House Committee on Financial Services held a hearing with Treasury Secretary Janet Yellen on the international financial system. 

The House Committee on Small Business held a hearing to discuss public and private resources available to help small businesses. 

The Financial Stability Oversight Council (FSOC) convened in an executive session to hear updates from staff of the Federal Reserve Board on financial stability vulnerabilities and on the transition away from LIBOR. FSOC members also discussed the ability of market participants to manage their interest rate risk and liquidity risk in the current economic environment. Council members discussed extending the public comment period for an additional 30 days for the Council’s proposed analytic framework for financial stability risk identification, assessment, and response, and the Council’s proposed interpretive guidance regarding nonbank financial company determinations.  The public comment periods for the two proposals will be extended to July 27, 2023.

The Office of Information and Regulatory Review (OIRA) released the Spring 2023 Regulatory Agenda, which details actions that federal agencies are considering over the coming months. The agenda provides that the Consumer Financial Protection Bureau’s Section 1033 on personal financial data rights Notice of Proposed Rulemaking (NPRM) is anticipated in October 2023. It also signals that the Bureau intends to issue a NPRM in July 2023 that would allow it to exercise supervisory authority over a greater number of nonbank financial companies that participate in the consumer payments market.

Need to catch up on what happened last week? Check out our June 16th newsletter here.