October 20, 2023

Rep. Jim Jordan (R-OH) lost an internal ballot to remain the GOP speaker nominee, hours after failing to win the speakership in a third round of floor voting on Friday. On the third ballot, 25 Republicans voted against Rep. Jordan, up from 22 in the second round and 20 in the first. Rep. Steve Scalise (R-LA), the No. 2 House Republican who also was unable to secure enough support to be Speaker, said the Conference will hold a candidate forum at 6:30 pm on Monday night.

The Consumer Financial Protection Bureau (CFPB) proposed its much anticipated rulemaking regarding consumer financial data rights under Section 1033 of the Dodd-Frank Act. The rule would require companies to share data at consumers’ discretion with other companies. Notably, the Bureau intends to promulgate additional rulemakings to cover other products & services. Comments are due December 29. 

The U.S. Department of the Treasury’s (Treasury) Financial Crimes Enforcement Network (FinCEN) announced a Notice of Proposed Rulemaking (NPRM) that identifies international convertible virtual currency mixing (CVC mixing) as a class of transactions of primary money laundering concern. The NPRM would require covered financial institutions to report information about a transaction when they know, suspect, or have reason to suspect it involves CVC mixing within or involving jurisdictions outside the United States. Comments will be due 90 days after it is published in the Federal Register.

FinCEN issued an alert to assist financial institutions in identifying funding streams for Hamas. The alert contains red flags that FinCEN has identified to help detect, prevent, and report potential suspicious activity related to Hamas’ terrorist financing activity. According to FinCEN, as part of a whole-of-government response, Treasury is taking all steps necessary, including issuing the alert and engaging with foreign counterparts, to deny Hamas the ability to raise and use funds worldwide for its terrorist activities.

Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson said in a speech regarding terrorist financing and money laundering that Treasury is closely monitoring how Hamas and Palestinian Islamic Jihad (PIJ) use virtual assets to raise and move funds. “We are in active collaboration with our counterparts who have seized hundreds of Hamas and PIJ accounts from virtual asset service providers, and Treasury will continue to establish transparency in the virtual asset ecosystem in order to combat illicit activity by criminals, rogue states, and terrorist financiers,” he said. He stated that the top priority in Treasury’s National Strategy for Combating Illicit Financing is closing the legal and regulatory gaps that illicit actors exploit, which includes enhancing corporate transparency, curtailing money laundering through real estate, and combating the misuse of sectors that lack comprehensive AML/CFT obligations.

Treasury Under Secretary for Domestic Finance Nellie Liang discussed in a speech how macroprudential policymaking is developing in the United States. She outlined the following: identifying and addressing vulnerabilities in the nonbank financial sector; the countercyclical features of bank capital regulation; and bank liquidity risk management in light of accelerated runs on insured deposits. 

Treasury Under Secretary for International Affairs Jay Shambaugh discussed in a speech central bank digital currencies (CBDC) and the cross-border payments landscape. He discussed the current landscape for international payments innovation; U.S. objectives, values, and interests most relevant to cross-border payments innovations; and Treasury’s priorities for improving cross-border payments.

Treasury, the Internal Revenue Service (IRS), and the U.S. Department of Energy announced that applications for the Low-Income Communities Bonus Credit program under Section 48(e) of the Internal Revenue Code are now open.

The IRS is launching new initiatives using Inflation Reduction Act (IRA) funding to ensure large corporations pay taxes owed. These initiatives include a large foreign-owned corporations transfer pricing initiative; expansion of the Large Corporate Compliance program; cracking down on abuse of the repealed corporate tax break; prioritization of high-income cases; community assistance visits, and opening taxpayer assistance centers.

National Economic Council Director Lael Brainard delivered remarks on opportunity, inclusion, and growth at the Joint Center for Political and Economic Studies. Director Brainard discussed expanding capital access, breaking down barriers to wealth building, and building pathways to economic opportunity.

The Federal Reserve Board (FRB) issued an enforcement action and fined Metropolitan Commercial Bank (MCB), of New York, New York, approximately $14.5 million for violations of customer identification rules and for deficient third-party risk management practices relating to the bank’s issuance of prepaid card accounts. The action complemented an action by the NY Department of Financial Services (DFS).

The FRB, Federal Deposit Insurance Corporation (FDIC), and Office of the Comptroller of the Currency (OCC) announced they extended the comment period on their large bank capital proposal to January 16, 2024. Relatedly, the FRB launched a data collection to gather more information from the banks affected by the large bank capital proposal it announced earlier this year. The FRB also extended its comment period for its proposal to modify the capital surcharge for the largest and most complex banks to January 16, 2024.

The FRB issued a notice for a meeting to be held on October 25, during which it will consider proposed revisions to the FRB’s debit interchange fee cap.

FRB Vice Chair for Supervision Michael Barr delivered a speech regarding stress testing where he discussed the next steps for stress testing and why he thinks that using multiple exploratory scenarios will help improve understanding of risk in the banking system.

The FDIC’s Office of Inspector General (OIG) published a report entitled FDIC Strategies Related to Crypto-Asset Risks, recommending that the FDIC establish a plan with timeframes for assessing risks pertaining to crypto-related activities, and update and clarify the supervisory feedback process related to its review of supervised institutions’ crypto-related activities.

The OCC published the fall 2023 edition of the Interest Rate Risk Statistics Report. The report presents interest rate risk data gathered during examinations of OCC-supervised midsize and community banks and federal savings associations.

The OCC released enforcement actions taken against individuals currently and formerly affiliated with national banks and federal savings associations (collectively, banks). The enforcement actions announced were Orders of Prohibition against John S. Werner, Former Universal Banker, North American Savings Bank, FSB, Grandview, Missouri, for using his position at the bank to embezzle funds from a customer’s account for his personal benefit, without the bank customer’s knowledge or authorization, which also resulted in a loss to the bank; and against Robyn LaPenta, Former Branch Manager, Evans Bank, N.A., Angola, New York, for abusing her position at the bank to initiate fraudulent cash transactions from the accounts of six elderly bank customers for her personal benefit, which also resulted in a loss to the bank.

The National Credit Union Administration (NCUA) Board held its ninth open meeting of 2023, where it unanimously approved a proposed rule incorporating its Second Chance Interpretive Ruling and Policy Statement and the Fair Hiring in Banking Act into its regulations. The NCUA Board also approved a proposed rule that would simplify share insurance regulations by establishing a “trust accounts” category.

The U.S. Court of Appeals for the Fifth Circuit upheld Nasdaq’s board diversity rule, requiring companies listed on the exchange to have women and minority directors on their boards or explain why they do not. The court rejected lawsuits seeking to block the rule by the National Center for Public Policy Research and the Alliance for Fair Board Recruitment.

Rep. Andy Barr (R-KY), Chairman of the House Financial Services Committee Subcommittee on Financial Institutions and Monetary Policy, sent a letter to FRB Vice Chair for Supervision Michael Barr expressing disappointment in his response to his and Subcommittee Ranking Member Bill Foster’s (D-IL) letter requesting a detailed quantitative analysis of their “holistic review,” which was made prior to the release of the July 27, 2023 Notice of Proposed Rulemaking (NPRM) modifying bank capital requirements in anticipation of better understanding of the analysis being used to construct the regulatory proposal.

Rep. French Hill (R-AR) delivered a speech at the Exchequer Club on Basel III Endgame, government spending in Washington, and an update on the House Financial Services Committee.

New York Attorney General Letitia James sued Gemini Trust Co. along with the crypto conglomerate Digital Currency Group and its brokerage Genesis Global Capital, alleging the digital asset firms defrauded hundreds of thousands of investors during last year’s market crash.

The Senate voted 53-44 to approve S.J. Res. 32, a resolution overturning the implementation of the Consumer Financial Protection Bureau (CFPB)’s final rule under Section 1071 of the Dodd-Frank Act requiring lenders to report demographic data on small-business loan recipients. The House of Representatives must still act on the resolution. The White House threatened to veto the bill in a Statement of Administration Policy, arguing that the resolution would hamper the efforts to promote transparency and accountability in small business lending and create hurdles for mission-driven lenders and community organizations striving to close gaps in capital access for minority- and women-owned businesses.

The California Department of Financial Protection and Innovation (DFPI) and 43 other state agencies reached settlements with ACI Payments, Inc. DFPI and the state agencies alleged that ACI erroneously initiated electronic transactions totaling $2.3 billion from the accounts of 480,000 mortgage holders serviced by Mr. Cooper (formerly known as Nationstar Mortgage, LLC). State regulators levied $10 million in fines through a multistate enforcement action led by regulators from Arkansas, Connecticut, Maryland, and Texas with support from the Conference of State Bank Supervisors. Additionally, 50 state attorneys general levied $10 million in fines to ACI, in coordination with state regulators.

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