Top of the Agenda
House Plans Votes on Legislation to End Anonymous Shell Companies and AML Reform
Next week, the House is expected to consider HR 2513, the Corporate Transparency Act, which would help to end anonymous shell companies and HR 2514, the COUNTER Act to reform the Bank Secrecy Act. The House will debate and vote on HR 2513 by Congressman Maloney (D-NY) next week and consider the COUNTER Act by Congressman Emanuel Cleaver (D-MO) under suspension of the rules. BPI is a strong supporter of ending the use of anonymous shell companies and modernizing the AML regime. As BPI noted in a joint trade group letter, HR 2513 “strikes the right balance between imposing minimal requirements on small businesses while providing critical information to law enforcement and financial institutions performing due diligence.” We expect the measures to be a combined product sent to the Senate upon passage.
In the Senate, a group of eight senators, comprised of Senators Mark Warner (D-VA), Tom Cotton (R-AR), Doug Jones (D-AL), Mike Rounds (R-SD), Bob Menendez (D-NJ), John Kennedy (R-LA), Catherine Cortez Masto (D-NV), and Jerry Moran (R-KS), have introduced the Improving Laundering Laws and Increasing Comprehensive Information Tracking of Criminal Activity in Shell Holdings (ILLICIT CASH) Act to end anonymous shell companies and update the AML regime. In advance of the House floor consideration, on October 17 BPI and the FACT Coalition hosted a panel discussion featuring leading experts to discuss how criminals use shell companies to facilitate their illicit activities, and why a legislative solution is critically needed.
5 Stories Driving the Week
1. Reducing Spurious Volatility in the Federal Reserve’s Supervisory Stress Tests
On October 16, BPI published a new research note documenting some undesirable variability in the Federal Reserve’s supervisory stress tests. The uncertainty and volatility of capital requirements can cause banks to pull away from lending to households and businesses and even reduce the willingness to provide funding for financial market activities that carry very little risk. The note finds that the opacity of supervisory models, on top of the variability of model projections, leads to uncertainty as to what level of capital is appropriate for banks to hold.
2. FDIC Approves Resolution Planning, Tailoring Rules
In Case You Missed It
CFPB Announces Taskforce on Federal Consumer Financial Law
On October 11, the CFPB announced the creation of a “Taskforce on Federal Consumer Financial Law” focused on ways to “harmonize and modernize” the consumer financial laws and their implementing regulations. Through new research and legal analysis, the taskforce will examine “the existing legal and regulatory environment facing consumers and financial services providers” and make recommendations for improvements to CFPB Director Kathleen Kraninger with a specific focus on the enumerated consumer credit laws to allow for more simplified and modernized regulation.
FASB Delays CECL Accounting Implementation for Small Companies
On October 16, the Financial Accounting Standards Board (FASB) extended the implementation deadline for the current expected credit losses (CECL) accounting standard until 2023 for small reporting companies, public companies that don’t file with the SEC, and private and nonprofit companies. CECL will require banks to establish reserves upon origination of a loan to capture “expected losses” that would occur over the life of a loan. Large and smaller public banks were unaffected by the delay. BPI research has found that CECL would make lending procyclical and have significant unintended consequences on lending during an economic downturn.
Rise Of Fintech Weakens Law To Prevent Lending Discrimination
Roll Call reported that the Community Reinvestment Act needs to be updated to consider the growth of online banks. “A 2018 study by the Federal Reserve Bank of Philadelphia showed banks made 10 to 20 percent more loans to low- and moderate-income residents inside their assessment areas than outside. But the growth of online banks is poking holes in the law’s coverage.” Officials at federal banking regulatory agencies are working to update the 1977 regulations. On October 16, FDIC Chairman Jelena McWilliams said that her goal is for the agencies to “move together,” but that “a scenario in which the agencies do not move forward at the same time is also on the table.”
Better Business Bureau Finds Business Email Compromise Scams Skyrocketing
The Better Business Bureau recently released a report finding business email compromise (BEC) scams are skyrocketing in frequency and have cost businesses more than $3 billion since 2016. BEC is a form of fraud in which the fraudster poses as a reliable source who sends an email from a spoofed or hacked account to an individual who pays bills in business, government or non-profit organizations. BPI, through its technology policy division, BITS, runs a fraud reduction program that is working with financial institutions to enhance interbank communications with the goal of mitigating consumer losses from BEC fraud.
- 10/18/2019 — FDIC Consumer Research Symposium
- 10/18/2019 — House Task Force on AI Hearing on Cloud Computing
- 10/21/2019 — Georgetown Law Fintech Week Forum with FDIC Chairman McWilliams
- 10/22/2019 — House Financial Services Hearing on Administration’s Housing Finance Plans
- 10/22/2019 — FDIC Economic Inclusion Advisory Committee Meeting
- 10/22/2019 — Senate Banking Committee Hearing on Consolidated Audit Trail
- 10/22/2019 — House Financial Services Subcommittee on Minority Depository Institutions
- 10/23/2019 — Facebook CEO Mark Zuckerberg Testifies on Libra in House Financial Services Committee
- 11/19/2019 — The Clearing House + BPI 2019 Annual Conference: The Clearing House and BPI will host the 2019 Annual Conference from November 19 to 21. The event provides a forum for the industry’s leaders to examine the changing dynamics of the bank regulatory and payments landscapes with two and half days of high-level keynote speakers, in-depth expert panels, and networking.
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