SDBA eNews

May 6, 2021

Fed Proposes Guidelines for Payments System Access

In a significant move yesterday, the Federal Reserve proposed new guidelines that it will use when evaluating requests for master accounts with the Fed or access to the agency’s financial services. The proposal comes amid growing requests from fintech firms and other providers to gain access to the payments system. Comments on the proposal are due 60 days after publication in the Federal Register.

Under the proposed guidelines, the Fed will consider:

  • Whether the institution is legally eligible to maintain an account at a Federal Reserve Bank and has a “well-founded, clear, transparent and enforceable legal basis for its operations.”
  • Whether the provision of an account and services would present or create undue credit, operational, settlement, cyber or other risks to the Reserve Bank, or to the broader payments system.
  • Whether the provision of an account and services would create undue risk to U.S. financial stability.
  • Whether the provision of an account and services would create undue risk to the economy by facilitating illicit activities.

In the event the Fed decides to grant an access request, “it may impose (at the time of account opening, granting access to service or any time thereafter) obligations relating to, or conditions or limitations on, use of the account or services as necessary to limit operational, credit, legal or other risks posed to the Reserve Banks, the payment system, financial stability or the implementation of monetary policy or to address other considerations,” according to the proposal. View the proposal.

SBA: PPP Funds Exhausted for All But CDFIs, MDIs

The Small Business Administration informed trade associations on Tuesday that Paycheck Protection Program funding has been exhausted and that the PPP application portal stopped accepting applications for loans from most lenders.

SBA said that it has reserved approximately $6 billion in funding for previously submitted loan applications subject to hold codes that have yet to be resolved. There is also approximately $8 billion remaining in congressionally mandated funding for PPP loans made by designated “community financial institutions,” defined for bankers’ purposes as minority depository institutions and community development financial institutions.

SBA reminded trade associations that loan applications that have not yet received an SBA loan number have not been approved. Banks with applicants in this situation may consider referring clients to MDIs and CDFIs.

"For more than a year, banks of all sizes and their dedicated employees have worked day and night to ensure these critical funds reach as many small businesses affected by the pandemic as possible, accounting for 74% of the 10.8 million loans issued and 91% of the $780 billion in PPP loan dollars to date,” said ABA spokesperson Ian McKendry. “Those bank efforts to help small business customers will continue. With the portal closed to most lenders, America’s banks will remain focused on helping borrowers still in the pipeline resolve SBA hold codes and other outstanding loan issues, so they can receive their PPP funds.” For more information, contact [email protected].

ABA Supports Bill to Encourage De Novo Bank Formation 

The ABA yesterday submitted a letter of support for H.R. 2561, the Promoting Access to Capital in Underbanked Communities Act of 2021, which would establish a three-year phase-in period for new banks to comply with federal capital standards, among other provisions designed to promote de novo banking. Rep. Andy Barr (R-Ky.) introduced the bill, having previously put forth a similar one in the last Congress.

“By facilitating the formation of new banks in urban and rural areas, this legislation expands banking access for both individuals and small- and medium-sized businesses,” the ABA said. "The bill would unlock economic opportunity, growth and investment in communities most in need, while also promoting competition. The temporary regulatory adjustments provided in this bill are a reasonable step to encourage de novo formation of banks that will be well-equipped to serve and respond to the pressing banking and financial needs of their local communities.” Read the letter.

ABA, Trade Groups Urge OCC to Formally Withdraw 2020 CRA Rule

ABA and nine other financial trade groups called for the OCC to formally withdraw or delay its June 2020 Community Reinvestment Act rule, following speculation that the OCC will likely pursue a different CRA modernization course under a new comptroller.

The groups urged the OCC to announce publicly that it will coordinate with the Federal Reserve and the FDIC on a joint CRA rulemaking. In support of this joint rulemaking, they said, the OCC should withdraw the rule or delay the compliance date of the 2020 CRA rule for at least two years before significant funds and resources are committed to re-tool existing CRA programs.

“Banks, community advocates and policymakers overwhelmingly agree that the OCC should undertake CRA modernization jointly with the Federal Reserve and the FDIC,” the groups said. “With this request, we reaffirm our commitment to engaging in a constructive dialogue and to engaging with the banking agencies to develop an updated CRA framework that benefits communities, banks and regulators alike.” Read the letter. For more information, contact ABA’s Krista Shonk.

ABA Recommends Standards for FinCEN Beneficial Ownership Registry

As the Financial Crimes Enforcement Network prepares to create a new beneficial ownership registry, ABA made several recommendations that should guide the agency as it develops the database—including that FinCEN ensure usability and ease of access for reporting companies, law enforcement and financial institutions.

In a comment letter to FinCEN yesterday, the ABA said it supports the creation of the registry and that reporting should build on existing requirements in FinCEN’s customer due diligence rule. The Association also recommended that FinCEN take steps to verify the information submitted by reporting companies; that definitions for terms such as “beneficial ownership” be clear and simple; and that FinCEN take appropriate steps to notify reporting companies about the requirements.

The ABA also emphasized that banks should have simple and comprehensive access to the registry to support their anti-money laundering efforts and that reporting companies should submit information electronically to avoid errors that can occur when transcribing data from paper forms. Read the comment letter.

ABA Urges IRS to Delay New Draft Retirement Forms

The ABA urged the IRS on Tuesday to delay the use of new draft forms W-4P and W-4R, which are used to determine the appropriate amount of federal income tax to be withheld for various types of retirement distributions.

In a letter to the IRS, the Association strongly recommended that the implementation of the new forms be delayed until Jan. 1, 2023, and that any penalties imposed for failure to meet the new requirements be waived during the initial change period.

The ABA noted selected issues with the new forms including that additional time is needed for process and system changes, design of the elections on the forms related to withholding percentages, customer education and banker training. Read the letter. For additional information contact ABA’s Phoebe Papageorgiou or John Kinsella.

ABA Foundation to Host Webinar on Chronic Fraud Victimization 

The ABA Foundation will host a free webinar on Wednesday, May, 12 at noon CDT examining new research from the FINRA Foundation and AARP Fraud Watch Network on the drivers of chronic fraud victimization. The virtual panel will also feature a banker expert from Citi, who will discuss strategies to protect elders and other vulnerable customers from fraud. Register for the webinar.

Two HSA Webinars To Be Offered in May

JM Consultants is holding two health savings accounts (HSA) webinars in May virtually via GoToMeeting. Both webinars will be taught by Michael O'Brien. 

An Introduction to HSAs will be held on Thursday, May 13, at 9:30 to 10:45 a.m. CDT. HSAs are becoming a popular addition to health care coverage for employers offering high deductible plans to employees and their families. This webinar will provide a solid foundation of operational and compliance issues associated with providing HSAs to customers, including opening, maintaining and distributing procedures. Learn more and register

HSAs: Beyond the Basics will be held on Thursday, May 20, at 9:30 to 10:45 a.m. CDT. Financial organizations are beginning to see more complex transactions due to increased customer activity. This activity requires personnel to review their existing HSA procedures to ensure transactions are handled properly. This webinar will explore the areas of employee eligibility, handling excess and mistaken distributions, investment diversification and product expansion, including how HSAs are being touted as a retirement savings vehicle in addition to a health care coverage option. Learn more and register


Question of the Week

Question: My customer would like to establish a benefit account for a fundraiser they are doing in their community. What type of account should this be and what documentation is needed?

Answer: Generally, benefit or memorial accounts are accounts that will be used in connection with raising money for people who need financial assistance due to an accident, illness or other tragedy. There are several ways that these types of accounts could be set up at the financial institution:

  • A simple trust can be drafted, and the account opened in the name of the trust (e.g.—irrevocable trust agreement).
  • Organization assisting in the fundraiser or memorial could open the account under their name for collected and deposited funds (e.g.—treat like opening an organization account)
  • Account could be opened in name of person(s) benefiting from the fundraiser (e.g.—treat account like individual/single-party or joint/multiple-part account but the beneficiary must be authorized to transact on the account).

The above methods are generally the only practical methods used when determining how to establish these types of accounts. Some banks may allow customers to open these accounts as informal trusts, like “FBO” or “ITF” accounts. But this brings in a couple of other considerations for the bank, especially when it comes to ownership of the account and CIP purposes.

And as always, the bank is within their rights to recommend the customer consult with an attorney or a tax professional.

C/A has an excellent cheat sheet for benefit/memorial accounts that further breaks down these considerations here:

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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 and ask for our Membership Team.

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Contact Alisa Bousa, SDBA, at 605.224.1653 or via email.