Finance & Banking
While the legal community has spent much of the last year exhaustively dissecting the European Union’s new General Data Protection Regulation (GDPR), nearly half of businesses in the United States are still not compliant with standards governing the collection, storage, and disposal of payment (credit/debit) card data. Businesses of all sizes should work to ensure that they understand and are in compliance with these standards, or risk significant exposure in the event of a payment card data breach traced back to their organization.
On March 6th, 2018 the. District Court for the Eastern District of New York upheld the classification of cryptocurrencies, such as Bitcoin and Litecoin, as commodities. The ruling subjects the cryptocurrencies to the regulation of the U.S. Commodity Futures Trading Commission (CFTC).
Compliance failures in banking can often result in real harm to borrowers. In the case of Wells Fargo, a compliance error resulted in 400 of the bank’s customers losing their homes. Due to an issue in the bank’s software system, the institution denied loan modifications to borrowers who should have qualified. This latest failure adds to the myriad of issues Wells Fargo bungled over the past several months. For compliance professionals, the failure demonstrates the risks of automation in compliance, the importance of technical expertise, and the risks of decision-making without putting the interests of the customer first.
The IRS has decided to shutdown its Offshore Voluntary Disclosure Program (OVDP) on September 28, 2018. The program offers amnesty from criminal prosecution and a set penalty structure for those who have previously failed to disclose foreign bank accounts and other foreign assets, including those held through undisclosed foreign entities. Failure to disclose could include failure to file the annual FinCEN Form 114,most commonly referred to as the foreign bank account report or “FBAR”, as well as the failure to report income from such accounts and assets on tax returns and the failure to provide various other foreign information forms and returns.
New discussions in the U.S. Senate indicate a likely repeal of 2010’s controversial Dodd-Frank Act. Designed in response to the 2008 economic crisis, the Dodd-Frank Act implemented regulations on banks and lending agencies to provide greater financial stability and consumer protection. The fundamental purpose of Dodd-Frank was to increase oversight and transparency among financial institutions. However, the Dodd-Frank Act has been the target of much criticism, most notably that its imposed regulations stifle the growth of smaller institutions. As of March 2018, Senate discussions indicate an intent to lay the foundations to remove this regulation.
The Volcker Rule: Where we stand and where we could go John Martin Associate Editor Loyola University Chicago School of Law J.D. 2018 On January 24, 2018, a coalition of 43 states’ community banking associations sent a letter to majority leader Senator Mitch McConnell and minority leader Senator Charles Schumer asking for bipartisan collaboration …
Following the 2016 Wells Fargo scandal in which the bank opened millions of unauthorized bank and credit card accounts to collect fees, federal regulators have worked to address and respond to the corporation’s illegal conduct. On February 2nd, 2018, the U.S. Federal Reserve imposed unprecedented restrictions against Wells Fargo & Co. when it capped the bank’s growth for 2018 such that it could not exceed the total assets owned at the end of 2017. This restriction marks a substantial departure from previous penalties issued for improper compliance. Changes in policies and procedures and this novel punishment reflect a notable shift in the national bank’s expectations of corporate directors.
Regulation in the financial sector is critical to preventing crimes that include fraud, money laundering tax evasion, human trafficking, aiding drug trafficking, and even financing terrorism. Despite the importance of regulation and banking institutions’ compliance with such regulations, many laws regarding money laundering are outdated and prevent efficient prevention of such crimes. Additionally, enforcement against large financial institutions is a difficult matter because of the harm that penalizing them could have on the economy.
Beginning January, 2018, U.S. citizens with unpaid taxes may find their U.S. passport applications denied and their existing passports revoked. The I.R.S. announced that it will begin implementation of procedures to notify the State Department of taxpayers the I.R.S. certifies as owing a “seriously delinquent tax debt.” This may come as a rude awakening to many Americans, although both the press and television news issued warnings going back more than a year ago.
The Trump administration is delivering on its promise to deregulate America. Since taking office, numerous regulations spanning everything from energy to health care have been repealed or weakened. The financial services industry is not immune to the deregulation movement. The Trump administration is acting through appointments, executive agencies, and legislation to deregulate the financial services industry. Proponents of deregulation claim the movement is needed after Dodd-Frank and strict post-financial crisis regulation. However, in deregulating financial services, the Trump Administration—and compliance professionals—should proceed cautiously.