U.S. Developments
Regulatory Updates
OCC Seeks Comments on Proposed Innovation Pilot Program
The Office of the Comptroller of the Currency (“OCC”) is soliciting public comment on its proposed Innovation Pilot Program. Similar to state-level regulatory sandbox models, the proposed program would allow OCC-supervised financial institutions, including those working with third-party vendors, to apply to test pilots of potential products and services and receive early regulatory input from the OCC. Eligible entities may propose a pilot individually or collaborate with multiple banks in a consortium. The OCC will consider proposals at various stages of development, from proof of concept to live testing of pilots. To enter a pilot, an eligible entity will have a preliminary discussion with the OCC about the proposed pilot, and then after the discussion submit an expression of interest (an “EOI”) that addresses the description of the pilot, including a summary of proposed controls and safeguards and the desired OCC engagement. The OCC will then evaluate the pilot to determine if it is a fit for the program. OCC engagement in a pilot will last no less than three months and no greater than 24 months, with the duration subject to a case-by-case determination by the OCC. During the pilot, the entity will be required to submit periodic reports on its progress. The proposed program comes out of the OCC’s existing innovation office, but is separate from its new fintech national bank charter. The OCC’s Chief Innovation Officer, Beth Knickerbocker, has noted that blockchain technology could be an option for these pilot projects, and the OCC is going to consider how it supervises such activity by banks.
Comments can be submitted to the OCC through June 14, 2019.
This latest OCC initiative is part of an increasing effort to encourage innovation by regulated entities, including through the incorporation of technology solutions to common issues. For example, in a December 2018 joint statement with other bank regulatory agencies, banks were encouraged to consider how to implement innovative approaches to meet their Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) compliance obligations. The joint statement discussed and welcomed the use of artificial intelligence and digital identity technologies to identify complex suspicious activity and other vulnerabilities and threats to banks. In addition, the joint statement encouraged banks to engage with regulators to discuss pilot programs for innovative BSA/AML approaches. The proposed Innovation Pilot Program would appear to fit with the aims of the OCC’s other innovation initiatives.
OFAC Issues Framework for OFAC Compliance Commitments
The Office of Foreign Assets Control (“OFAC”) administers and enforces U.S. economic sanctions programs in accordance with U.S. national security and foreign policy. The OFAC had not previously published guidance addressing essential elements for an effective sanctions compliance program (“SCP”), but has now done so. Specifically, on May 2, 2019, the OFAC published guidance entitled, “A Framework for OFAC Compliance Commitments.” This guidance clearly establishes the agency’s expectations regarding an effective SCP. Given the importance placed on an effective SCP by the OFAC in its enforcement decisions, including the determination of the amount of any civil penalty, companies with international activities should consider whether to update their SCP to meet the agency’s standards.
Perkins Coie has published an update with in-depth review of the framework with important takeaways. The update can be found here.
CFBP Requests Information Regarding Potential Modifications to Remittance Rule
The Consumer Financial Protection Bureau (“CFPB”) issued a request for information from the public regarding potential modifications to its Remittance Rule (the “Rule”). The Rule sets requirements for money transfer providers to disclose certain information to consumers, including the price of a remittance transfer, the amount to be delivered to a recipient, the date of availability, and the exact exchange rate. The Rule does have an exception that allows, under certain circumstances, financial institutions to provide estimates for certain transfer fees, a transfer’s amount, and a transfer’s exchange rate. This exemption expires on July 21, 2020 unless extended by Congress. The request for information seeks feedback on potential changes to the Rule that could mitigate possible negative effects created by the expiring exemption.
Additionally, the CFPB is seeking information regarding whether it should modify the Rule’s safe harbor threshold, which currently exempts providers who process 100 or fewer remittance transfers during the current and previous calendar years. The CFPB is also considering adding a “small financial institution” exception.
Comments to the CFBP are due by June 28, 2019.