SDBA eNews

October 24, 2019

House Passes ABA-Advocated AML Modernization Bill in Bipartisan Vote

The House Tuesday night voted 249-173 to pass the ABA-backed Corporate Transparency Act (H.R. 2513). The legislation, sponsored by Rep. Carolyn Maloney (D-N.Y.), would direct the Financial Crimes Enforcement Network to create a national database that banks could use to verify a business’s beneficial ownership information. The bill was amended before passage to include legislation championed by Rep. Emanuel Cleaver (D-Mo.) that would modernize the existing anti-money laundering/Bank Secrecy Act framework by, among other things, enhancing bank-law enforcement communications.

ABA President and CEO Rob Nichols welcomed the bipartisan vote as “a critical step forward . . . that will help prevent bad actors from accessing the financial system.” He added that the bill would “build on the strong cooperation between banks and law enforcement by improving information sharing while ensuring that financial institutions keep providing the most valuable and relevant information possible.”

In the Senate, the ABA-supported Illicit Cash Act contains similar provisions to H.R. 2513. “We urge the Senate to build on this momentum and move quickly to pass its own bipartisan bill,” Nichols said. An ABA Banking Journal Podcast episode last week featured detailed analysis of what these bills will mean for BSA compliance.  Listen to the episode.

House Members Call for OFR Study of CECL's Financial Stability Impact

A bipartisan group of 28 House members last week called on the Financial Stability Oversight Council to require that the Office of Financial Research study potential financial stability effects of the current expected credit loss model for loan loss accounting, which goes into effect for large reporting companies in January.

Specifically, the lawmakers called on OFR to study CECL’s procyclical characteristics and their effects on access to credit and market volatility; the effects of CECL on the solvency and leverage of financial institutions; and the effects of procyclicality on institutions complying with CECL, including contagion risk during times of economic stress. The letter cited research from ABA and other organizations indicating that “CECL will result in a drastic increase in loss reserves, causing a substantial increase in regulatory capital that will limit lending.”

Rep. Blaine Luetkemeyer (R-Mo.), the lead signer of the letter, raised the issue Tuesday during a House Financial Services Committee hearing. Treasury Secretary Steven Mnuchin, who chairs FSOC—a group of U.S. regulators established by the Dodd-Frank Act to monitor financial stability risks—replied that “I will discuss your request at the next FSOC meeting.” Read the letter.

DOL Proposes Expanded Use of Electronic Delivery for Plan Documents

The Labor Department on Wednesday issued its much-awaited proposal that would modernize retirement disclosures by providing a new safe harbor for employee benefit plan administrators to use electronic delivery for participant notices and disclosures. 

Under the proposal, plan administrators under the Employee Retirement Income Security Act that wish to rely on the existing safe harbor for electronic delivery—or to continue furnishing paper documents—may continue to do so. The new proposed safe harbor would feature a “notice and access” structure under which disclosures would be posted to a public website and participants notified electronically about these documents. Participants would be able to opt out of electronic delivery and choose to receive paper documents.

If finalized, this proposal would provide what ABA has long advocated: electronic delivery as the default method of delivery, making retirement plan disclosures and notices more efficient and useful for retirement savers, and less burdensome and costly for banks and other retirement services industry providers. Comments are due by Nov. 22. Read the proposal. For more information, or to provide feedback for ABA’s comment letter, contact Tim Keehan.

Federal Judge Blocks OCC's 'Fintech Charter'

A federal judge in New York on Monday blocked the OCC from issuing charters to non-depository special-purpose national banks, as the agency first proposed to do in 2016. The so-called fintech charter would have provided fintech firms with a consistent nationwide regulatory framework and would have imposed bank-like standards for capital, regulatory compliance and financial inclusion.

After Judge Victor Marrero declined to dismiss the case, holding that the National Bank Act does not permit the OCC to grant national bank charters to non-depository institutions without a statutory exception, he issued a judgment requested by the New York Department of Financial Services that vacated on a nationwide basis the OCC regulation permitting these charters. The OCC disagreed with the ruling and told news outlets that it would appeal Judge Marrero’s ruling. Read more about the case in the ABA Banking Journal.

McWilliams: FDIC Guidance Forthcoming on AI, Machine Learning

The FDIC is in the process of developing guidance for financial institutions on artificial intelligence and machine learning, FDIC Chairman Jelena McWilliams said during a speech in Washington, D.C., on Monday. McWilliams said that the guidance will address the “everyday” use of AI and machine learning, as well as how the FDIC will look at it from a supervisory perspective.

McWilliams also discussed the agency's plans to review its brokered deposit regulations, noting that the agency is aiming to have a proposal out for comment before year-end. She acknowledged that technology has fundamentally changed the nature of deposits, as consumer preferences increasingly shift to digital channels. “The question is: Do people know when they’re insured? With brokered deposits, that’s not always clear,” McWilliams said in comments to press after the event.

Speaking about innovation more broadly, McWilliams noted that as regulators, “we need to be committed to evolving our regulatory framework as the technology evolves.” She added that fintech can play a vital role in bringing more unbanked individuals into the financial system and fostering greater economic equality. “Technology is something where, if we use it in the right way, can get us there faster. As good regulators, we need to foster that.”

Podcast: Making Wealth Management Core to Your Community Bank

How can community banks make wealth management a profitable part of their strategy? At Canandaigua National Bank and Trust in New York, 45% of the bank’s non-interest income—and 15% of the bank’s total revenue—comes from wealth management, says EVP Sam Guerreri on the latest episode of the ABA Banking Journal Podcast, sponsored by Money Concepts International.

Guerreri explains the bank’s strategy for wealth management by embedding it with the core banking business with a focus on holistic financial planning. For example, the bank includes banking officers—retail or commercial—and wealth management staff on client calls and visits.

Guerreri also discusses areas of growth in wealth management, including fee-based investment management accounts, trust and estate planning and insurance to hedge risk, as well as what he sees as a shift away from commission-based activities and proprietary products. Listen to the episode.

Own, Secure and Protect Your Information Security Program

The theme for this year's National Cybersecurity Awareness Month is "Own IT. Secure IT. Protect IT." Join SBS as they discuss how a comprehensive and repeatable information security program (ISP) is a map of exactly how your organization owns, secures and protects your confidential customer information, computer systems, networks and applications.

SBS will hold the free webinar "Own, Secure and Protect Your ISP" on Tuesday, Oct. 29, at 9 a.m. CDT. SBS will look closely at the three critical components of an ISP--IT risk assessment, vendor management and business continuity planning--and share common solutions to help you mature your program. Register for the webinar.

On Wednesday, Oct. 30, SBS will hold the free webinar "Hacker Hour: Cybersecurity Awareness Round Table--Lessons from National Cybersecurity Awareness Month" at 2 p.m. CDT. SBS will have an open discussion focused on building a stronger security culture for your entire organization--from your board of directors and employees to your customers.

SBS will share new cybersecurity awareness ideas and techniques that organizations have implemented to support their security culture.  An updated "Unique  Ideas to Create a Culture of Cybersecurity" download documenting the 2019 ideas will be shared following the webinar. Register for the webinar

FTC Finds Fraud-Related Losses Up Among Older Consumers

Consumers aged 60 and older lost nearly $400 million to fraud in 2018, according to a report submitted to Congress last week by the Federal Trade Commission. The report details the FTC’s efforts to protect older consumers from fraud through research, law enforcement and education.

While FTC consumer complaint data from 2018 found that consumers aged 60 and above reported fewer incidents of losing money to fraud than younger adults, the dollar losses were higher for the older group—and on the rise. The median individual loss for consumers 80 and older was $1,700—a 55% increase over the previous year. Older consumers were also more likely to report losses resulting from certain types of fraud, including tech support scams, imposter fraud, and prize or lottery scams. Most fraud against older consumers was conducted over the phone, followed by online scams. And while gift cards are becoming the payment method of choice for scammers, wire transfers hold the top spot for total dollars lost to fraud.

The FTC offers a variety of outreach and education resources aimed at preventing fraud against older consumers. Banks can also participate in the ABA Foundation’s Safe Banking for Seniors program, which provides resources for banks on preventing elder fraud and partnering with law enforcement, as well as education materials for customers and community seniors.

The ABA will host a webinar on Nov. 19 at 11 a.m. CST to highlight banks’ efforts to fight elder fraud and abuse. The free webinar will discuss results from the ABA Foundation’s forthcoming 2019 Older Americans Benchmarking Survey. Register now.

Compliance Alliance

Question of the Week

Question: The private flood insurance regulations have a provision requiring an insured to file suit not later than one year after the date of a written denial for all or part of a claim under a policy, but the policy we’re looking at does not contain this provision. Is this policy acceptable if it meets the other criteria?

Answer: Unfortunately, it does have to have the provision regarding filing suit no later than one year.

The bank may still be able to accept it under discretionary acceptance provisions though.

Commenters asserted that the section of the proposed definition stating that a policy must require an insured to file suit not later than one year after the date of a written denial of all or part of a claim under the policy would disqualify private policies with different or no statutes of limitations. However, this provision also is part of the statutory definition,[24] and, therefore, the Agencies are retaining it in the final rule. 

You can also find that in our checklist:

Compliance rules and regulations change quickly. For timely compliance updates, subscribe to Compliance Alliance’s email newsletters.

Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call 888.353.3933 or email.

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Contact Alisa Bousa, SDBA, at 800.726.7322 or via email.