Increase to the Management Interlock Threshold Rule Approved

The Office of the Comptroller of the Currency (“OCC”), the Board of Governors of the Federal Reserve System (the “Federal Reserve”), and the Federal Deposit Insurance Corporation (“FDIC”) approved a change to the thresholds in the major assets prohibition for management interlocks stated in the Depository Institution Management Interlocks Act (“DIMIA”). Prior to the final rule, the DIMIA prohibited a management official of a depository organization that had total assets exceeding $2.5 billion from simultaneously serving as a management official of an unaffiliated depository organization that had total assets exceeding $1.5 billion (referred to as the “major assets prohibition”). The approved change now increases the respective $2.5 billion and $1.5 billion thresholds to $10 billion each.

In approving this change, the OCC, the Federal Reserve, and the FDIC found that having a uniform $10 billion threshold accords with other current thresholds that are used to distinguish between small and large institutions. Examples they listed include the following:

  • Sections 201 and 203 of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 provide for certain relief for institutions with less than $10 billion in total consolidated assets.
  • The Dodd-Frank Act distinguishes large banks from small banks by using a $10 billion threshold.
  • The Federal Reserve distinguishes community banking organizations from larger banking organizations by using a $10 billion asset threshold.

The net effect of this change results in an increase to the number of depository organizations that would no longer be subject to the major assets prohibition and thus reduces the number of institutions that will seek an exemption from the prohibition. This change takes effect upon its publication in the Federal Register.

California DBO Issues Cannabis Banking Guidance

On October 3, 2019, the California Department of Business Oversight (“DBO”) issued guidance in the form of a compliance questionnaire for state-chartered banks and credit unions that maintain banking relationships with marijuana-related businesses (“MRBs”). The DBO intends the guidance to support financial institutions that serve MRBs and to help those institutions make appropriate risk assessments. The DBO notes that it designed the questionnaire to address a financial institution’s program governance and compliance with the Bank Secrecy Act (“BSA”) and the Financial Crimes Enforcement Network’s (“FinCEN”) prior guidance for banking MRBs. The DBO also references a publication by the Conference of State Bank Supervisors (“CSBS”) released to aid bank examiners that examined banks working with MRBs. Finally, the DBO states that it will assist licensees with early consultations to develop cannabis banking initiatives and “will not bring regulatory actions against state-chartered banks or credit unions solely for establishing a banking relationship with licensed cannabis businesses,” but does expect that financial institutions will comply with all BSA, FinCEN, and other regulations and guidance applicable to such relationships.

Millennials More Likely than Older Consumers to Report Losing Money to Fraud

The Federal Trade Commission (“FTC”) recently published a Consumer Data Protection Spotlight report, a periodic publication that details data collected by the FTC about consumer complaints and other issues. The report finds that millennials (people aged 20-39) are twice as likely to report losing money to online shopping fraud than those 40 and over. The FTC considers online shopping fraud to include complaints about items that are never delivered or are not as advertised. The report finds that millennials reported losing $71 million to online shopping fraud over the past two years, or 15% of all fraud reported during that time period. Millennials also reported falling victim to other types of fraud at higher rates than consumers 40 and over, including to frauds such as fake check scams, offers that promise to help fix debt-related problems, or offers promising income through jobs, investments, or business opportunities. Most fraud originates from phone calls, but millennials fall victim to fraud originating from emails at far higher rates than other consumer groups. Of the types of fraud covered in the report, consumers 40 and over report only two types of fraud more than millennials do—tech support scams and romance scams. However, on average, millennials lose less money per fraud than consumers 40 and over, and the amount lost per fraud increases with age. Millennials lose about $400 per incident, consumers 40 and over lose about $500 per incident, consumers 60-79 lose about $649 per incident, and consumers 80 and over lose about $1,700 per incident.

UN Report Supports Fintech to Meet Sustainable Development Goals

The United Nations Secretary-General’s Task Force on Digital Financing of the Sustainable Development Goals (the “Task Force”) recently published a progress report regarding the Task Force’s findings so far on the effect of digitalization on financing of the UN’s Sustainable Development Goals (“SDGs”). The Secretary-General launched this Task Force in November 2018 to review ways to use digitalization to accelerate the financing of SDGs and to explore digital-finance–enabled opportunities and risks for financing the SDGs. The Task Force has hosted dialogues throughout the world, conducted its own research, and received submissions through a call for contributions. The call for contributions is open until October 31, 2019, and the Task Force is seeking contributions to identify use cases, understand perspectives on the relevant issues, and seek further actions the UN should undertake to utilize digitalization.

The progress report discusses how digitalization can increase access to financial products and services and information about making financial decisions, disintermediate the financial system, and provide people the ability to act collectively to control their finances. The progress report also notes that the advantages of digitalization is unavailable to those without access to affordable digital infrastructure or the necessary digital capabilities.

The progress report also states that digitalization can bringing uncertainties and risks. One example of such risks provided by the report is the use of artificial intelligence that leads to exclusionary profiling or more opportunities for the movement of illicit funds. Other concerns raised by the progress report include the risk for digitalization to reduce financing for SDGs because a hyper-liquid financial market makes short-term trading more profitable, and the risk that digital currencies could take away countries’ ability to manage their own monetary and economic affairs.

The report also notes that the Task Force’s future work will focus on identifying areas of opportunities to advance digital approaches to supporting SDGs, supporting governance innovations needed to harness digitalization and mitigate risks, building national and regional capabilities to accelerate digital financing of SDGs, identifying areas for international cooperation, and measuring progress toward the Task Force’s goals.