Weekly Fintech Focus
- FinCEN fines former bank officer $450 million for AML failures at the bank.
- CFPB hosts a symposium on consumer access to financial records and data aggregation.
- CSBS requests additional comments for MSB Model Law.
- FDIC requests input on modernization for bank advertising requirements.
FinCEN Fines Former Bank Officer for AML Failures
On March 4, 2020, the Financial Crimes Enforcement Network (FinCEN) announced its assessment of a $450,000 civil money penalty against the former Chief Operational Risk Officer at U.S. Bank for failures to prevent Bank Secrecy Act (BSA) violations at the bank. This action against the officer stems from a February 2018 action by FinCEN, the OCC, and the Department of Justice against U.S. Bank for its anti-money laundering failures, resulting in a $185 million penalty for the bank.
During his long tenure at the bank, he also held other senior positions within the bank’s AML compliance hierarchy, including, Chief Compliance Officer, Senior Vice President, Deputy Risk Officer, and Executive Vice President. As the Chief Operational Risk Officer, he reported directly to the CEO and communicated with the Board. He also supervised the bank’s AML compliance department, including the COO, AML Officer, and AML staff. During his time as the Chief Operational Risk Officer of the bank, the bank used automated transaction monitoring software to identify suspicious activity, but its system was set up to limit the number of alerts generated. In addition, the bank failed to provide enough staff to review the number of alerts derived from the system.
In its announcement, FinCEN explained that the officer was warned by his subordinates and by regulators that the suspicious activity monitoring system at the bank was dangerous and ill-advised, and through his actions the bank failed to properly file thousands of suspicious activity reports (SARs), which hindered law enforcement efforts. Internal warnings took the form of internal memos from staff about increased pressures on the AML staff to respond to increases in SAR volumes, law enforcement inquires, and closure recommendations. Bank internal testing even indicated that between 30% and 80% of the transactions falling just below the bank’s monitoring system’s thresholds resulted in the filing of SARs. The Office of the Comptroller of the Currency (OCC) warned the bank on numerous occasions that capping its monitoring system could result in an enforcement action. In the assessment of the civil money penalty against the officer, FinCEN asserts that the officer should have been aware of other bank enforcement actions that involved similar activity to U.S. Bank’s.
CFPB Symposium on Consumer Access to Financial Records
On February 26, 2020, the Consumer Financial Protection Bureau (CFPB) held a symposium that discussed Section 1033 of the Dodd-Frank Act’s requirement that a consumer have access their own financial data and how providers of consumer financial products make that data available. For years, and particularly since the CFPB issued its request for information (RFI) in 2016 about this issue, the marketplace has been debating the meaning and extent of this part of Dodd-Frank, and also awaiting the CFPB to promulgate rules as required by Dodd-Frank. The symposium focused on the market for consumer financial data used by the consumer and by third parties in light of the comments the CFPB had received in response to the RFI and the CFPB’s 2017 guidance to market participants.
CFPB Direct Kathleen Kraninger highlighted the 3 primary reasons for highlighting consumer access to their financial information: (1) the expansion of market participants, (2) the increase in scope and scale that personal data is incorporated into financial products, and (3) the amount of data sharing between third-parties that is occurring.
The CFPB Symposium additionally held a variety of panels that discussed several topics including the aspects concerning holders of consumer data, the benefits and challenges posed by consumers accessing their own data, market developments in the data aggregator industry, and policymaker considerations.
To view each panelists’ written statements, please visit here.
CSBS Requests Additional Comments for MSB Model Law
The Conference of State Bank Supervisors (CSBS) issued a second request for comments on its draft model language concerning money services businesses (MSB) as part of Vision 2020. To fulfill a primary goal of Vision 2020, CSBS has followed up on its initial request to obtain comments to its MSB model language with regard to regulations governing control, activity and exemption definitions, safety and soundness, and supervision.
Roughly a dozen companies have submitted comments so far, including industry groups and individual businesses. The deadline for comments is March 11, 2020.
We previously discussed the draft model law here.
FDIC Requests Input on Modernizing Advertising Requirements for Banking Services
The Federal Deposit Insurance Corporation (FDIC) is requesting the public’s input on the potential modernization of its signage and advertising requirements to better reflect how banks and savings associations currently operate and how consumers use banking services generally.
Currently, every FDIC-insured bank or savings institution is required to display the FDIC’s official sign and advertise in a manner that clearly communicates that the business is FDIC-insured.
The FDIC is also considering ways to prevent situations where consumers have difficulty determining whether they are dealing with an FDIC-insured bank or savings association. When in doubt, consumers can search the FDIC website to verify whether their institution is FDIC-insured.