Tag:Banking
Generative AI- The Next Frontier in Fighting Financial Crime
Artificial intelligence (AI) is the latest tool in a financial institution’s arsenal to restrict the flow of money being channeled to fund illegal activities worldwide. As criminals get more innovative and sophisticated in using the latest technology to evade detection of their financial crimes, financial institutions must follow suit and utilize similar technology to root out these crimes or risk facing regulatory sanctions. Money laundering generally refers to financial transactions in which criminals, including terrorist organizations, attempt to disguise the proceeds of their illicit activities by making the funds appear to have come from a legitimate source. However, this is not a new phenomenon. Congress passed the Bank Secrecy Act (BSA) in 1970 to ensure financial institutions follow a set of guidelines known as KYC (Know Your Customer/Client) to detect and prevent money laundering through their systems.
CFPB Takes Aim at Credit Card Late Fees in Latest Rule to Eliminate ‘Junk Fees’
In January 2022, the Consumer Financial Protection Bureau (CFPB) set out to increase transparency in the pricing of financial services products by implementing rules to eliminate ‘junk fees’ that often obscure the true price of financial products. Through this initiative, the CFPB analyzed the impact of numerous types of fees across banking while simultaneously attracting the scrutiny of banking advocacy organizations such as the American Banking Association (ABA) and the US Chamber of Commerce. These advocacy organizations have challenged the constitutionality of the CFPB funding structure. The CFPB examines all categories of financial products in the search for ‘junk fees’, including recently uncovering paper bank statement fees for statements that were never printed or mailed, add-on products being charged to paid-off auto loan accounts, undisclosed fees imposed on international money transfers, and bank operating systems double-dipping on non-sufficient funds fees. While litigation has recently settled in the Supreme Court to determine that the CFPB is constitutionally funded under the Appropriations Clause, the most recent rule by the CFPB to limit ‘junk fees’ imposed on credit card accounts remains on hold following a decision to grant a Preliminary Injunction by the US District Court for the Northern District of Texas.
Democrats in Washington Push For Stronger Banking Regulations
The Biden Administration acted strongly last month in response to the recent collapses of Silicon Valley Bank (SVB) and Signature Bank. Each collapse sent shockwaves through the U.S. banking system and shook the confidence of consumers nationwide. The Biden Administration showed swift and steady leadership in urgently addressing the crisis. The President and leading Democrats in Congress continue to push for stronger regulatory oversight with respect to the banks. This shows that the Democrats are on the right side of the banking issue, as they have been for the 16 years following the 2008 financial crisis.
The External and Internal Causes of SVB’s Collapse and the Role of Regulators
Megan Aldworth Associate Editor Loyola University Chicago School of Law, JD 2023 Silicon Valley Bank (SVB) started in Silicon Valley in 1983 and found a booming growth in tandem with the tech industry and venture capital. At its collapse, which spanned over 48 hours and started on the eve of March 8, it was …
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Senate Enjoys Rare Bipartisan Moment, Seeks to Punish Silicon Valley Bank Executives
n March 17, 2023, following the second-largest bank collapse in U.S. history, President Biden released a statement urging Congress to allow financial regulators to impose tougher penalties on the executives of failed banks. Encouragingly, on March 29–just twelve days later–the Senate proposed bipartisan legislation, dubbed the Failed Bank Executives Clawback Act (FBECA), which would grant the Federal Deposit Insurance Corporation (FDIC) clawback authority to confiscate all or part of the compensation received by bank executives in the five years leading up a bank’s failure.
Growing Banking Crisis: Silicon Valley Bank Failure
Founded in 1983, Silicon Valley Bank (SVB) is a midsize California-based lender that shook the foundation of the entire global financial system. Regulators closed SVB on March 10, making it the largest bank failure since the 2008 financial crisis and the second largest in U.S. history. While SVB offered various services from standard checking accounts to loans, it was primarily home to venture capitalists in the tech industry. Therefore, the majority of the corporate deposits were larger than the Federal Deposit Insurance Corporation’s (FDIC) $250,000 insurance limit, leaving over $150 billion in uninsured deposits at the end of 2022. The sudden collapse caused a frenzy leaving companies and investors vulnerable having already experienced mass layoffs in the tech industry.
The Role of Regulators During the Collapse of Silicon Valley Bank
On March 10th, 2023, Silicon Valley Bank (SVB) collapsed practically overnight, followed only two days later by the collapse of Signature Bank. Prior to its collapse, SVB uniquely served a single category of customers – start-ups. As the largest bank failure since the 2008 financial crisis, SVB’s bankruptcy resulted in significant consequences for the tech industry. While SVB has since been acquired by First Citizens BancShares, the House Financial Services Committee is currently seeking answers from both regulators and SVB executives about how such a failure could have occurred and how to prevent it from happening again.
Proposal to Change TULA Late Fee Maximum on Credit Cards: Is it Beneficial or Burdensome?
Megan Aldworth Associate Editor Loyola University Chicago School of Law, JD 2023 The Truth in Lending Act (TILA), established 1968, is aimed to protect consumers against unfair credit practices and billing by lenders. Under TILA, lenders must provide consumers (borrowers) with information that allows them to compare loan terms given by various lending institutions. …
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Deutsche Bank Reorganization Results in New Compliance Chief
Deutsche Bank, the multinational investment banking and financial services company, will name Laura Padovani as its new Chief Compliance Officer. The move comes as part of a broader reorganization in the company’s compliance division, taking place in the aftermath of regulatory investigations in the United States and Germany. The regulatory investigations of Deutsche Bank over the last several years concern the organization’s questionable practices as it relates to money laundering and other offenses. The investigations also involve massively high-profile individuals, such as Jeffrey Epstein and Donald Trump.
Coinbase Global Inc. Settlement Raises More Questions for Financial Regulators
On January 4th, 2023, the New York State Department of Financial Services made public that a $100 million settlement with the cryptocurrency exchange Coinbase Global Inc. (Coinbase) has been agreed to. The settlement follows an enforcement action imposed this past August aiming to regulate cryptocurrencies. With a lot of discussion happening given the recent collapse of FTX and anti-money laundering violations by Robinhood Markets, this action begs the question: should the digital currency industry be regulated nationwide and, if so, what should these regulatory agendas look like?