Fintech Week in Review: Week of April 1 – 5

U.S. Developments

Regulatory Updates

New Rules for Prepaid Cards, Digital Wallets, and P2P Transfer Apps Become Effective

As reported in this blog last year, the U.S. Consumer Financial Protection Bureau (“CFPB”) created a final rule implementing the Electronic Fund Transfer Act (“Regulation E”) and the Truth in Lending Act (“Regulation Z”). Originally released in October 2016, with an effective date of October 1, 2017, the final rule was delayed several times and finally became effective on April 1. The rule means that consumer protection measures like those for unauthorized charges and errors that have applied to products such as debit cards in the past will now apply to prepaid cards, digital wallets (e.g., Google Wallet), and person-to-person payment applications (e.g., Venmo and PayPal). Notable exclusions to the new rule include gift cards and applications like Apple Pay that do not store any value. Many providers now covered by the law have already adjusted their product offerings and terms of service to prepare for the new rule. Frequent delays in the effective date and numerous opportunities to make changes to the final rule have resulted in these platforms being subject to an increasingly complex regulatory framework. Continue Reading

FinTech Regulatory Week in Review: Week of March 11 – 15

Regulatory

Fed Board Delays New Same Day ACH Processing Window Until March 2021

The effective date of the new same-day Automated Clearing House (“ACH”) processing window (which would expand the end-of-day deadline to originate same-day transactions by two hours to 4:45 p.m. ET (1:45 p.m. PT)) has been deferred by six months to March 19, 2021.  The Federal Reserve Board of Governors (the “Fed Board”) has informed the national administrator of the ACH network (the “NACHA”) that the Fed Board currently cannot commit to change the Federal Reserve services necessary to enable the new window by June 30, 2019 (the deadline that was agreed upon per Supplement #1-2018 to the NACHA Operating Rules provided for in the rule). Continue Reading

ISDA Publishes Guidelines for Smart Derivatives Contracts

The International Swaps and Derivatives Association (ISDA) has published the first in a series of guidelines for what it colloquially refers to as “smart derivatives contracts” (the Guidelines).* A smart derivatives contract is a derivative that incorporates software code to automate aspects of the derivative transaction and operates on a distributed ledger, such as a blockchain. This series of papers is intended to “provide high-level guidance on the legal documentation and framework that currently governs derivatives trading, and to point out certain issues that may need to be considered by technology developers when introducing technology into that framework.” Read the full post on our sister blog, Derivatives and Repo Report.

Fintech Week in Review: Week of October 29 – November 2

U.S. Developments

Regulatory Updates

 FinCEN Issues Advisory on FATF’s Updated Recommendations

On October 31, FinCEN published an advisory on the international Financial Action Task Force’s (FATF’s) updated list of jurisdictions with serious regulatory deficiencies in anti-money laundering and combatting the financing of terrorism (AML/CFT). The advisory focused on North Korea (DPRK) and Iran, and FinCEN reminded financial institutions of their obligations when dealing with those jurisdictions.

Continue Reading

Fintech Week in Review – Week of October 8-12

International Developments

Policy Updates

IMF and World Bank Launch Bali FinTech Agenda

On October 11, 2018, the International Monetary Fund (“IMF”) and the World Bank Group launched the Bali FinTech Agenda, “a set of 12 policy elements aimed at helping member countries to harness the benefits and opportunities of rapid advances in financial technology that are transforming the provision of banking services, while at the same time managing the inherent risks.”  The 12 policy elements advance a pro-fintech  agenda of fostering innovation and development of new technologies across the globe.  Notably, the Bali FinTech Agenda emphasizes the importance of developing clear and predictable legal frameworks that keep pace with innovation.

The above is a summary of one of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.  These are the Fintech updates that ties to the post Blockchain in Review – Week of October 8-12, 2018 from our sister blog, VirtualCurrencyReport.

Federal Bank Regulators Issue Joint Statement on Collaborative BSA/AML Compliance

On October 3, 2018, a group of federal bank regulators and FinCEN announced in a joint statement that banks and credit unions could collaborate and share resources to manage their Bank Secrecy Act (“BSA”) and anti-money laundering (“AML”) obligations.  A collaborative arrangement does not modify or abrogate any of the bank’s BSA/AML obligations, and the joint statement merely provides examples and guidance for how banks can manage their obligations more effectively and efficiently.

Banks that may be best served by a collaborative arrangement are those with a community focus, and lower-risk profiles for money laundering or terrorist financing.  Utilizing a collaborative arrangement requires each bank to carefully consider its own individual risk profile.  In light of sound principles of corporate governance and bank safety and soundness, each bank should enter into such an arrangement only after conducting appropriate due diligence, including adequate documentation, evaluation of legal restrictions on such an arrangement, and establishment of appropriate oversight.

Nothing in the joint statement alters the four pillars of a bank’s BSA/AML compliance program: (1) a system of internal controls to ensure ongoing compliance; (2) independent testing of BSA/AML compliance; (3) designating a BSA compliance officer; and (4) training appropriate personnel.  With appropriate limits, each of these pillars can be addressed through a collaborative arrangement.

Sharing resources through a collaborative arrangement helps banks to meet their BSA/AML compliance obligations by providing access to specialized expertise, at reduced cost, that may be difficult to obtain in some markets.  The joint statement provides examples of how collaborative arrangements can be utilized to meet a bank’s BSA/AML compliance needs.

  • Internal Controls – Banks can work collaboratively to develop BSA/AML policies and procedures, including risk-based customer identification and account monitoring systems.
  • Independent Testing – Some banks may have difficult identifying an employee to conduct an independent set of the BSA/AML compliance program. A collaborative arrangement allows personnel at one bank to conduct the independent test at another bank.  Banks should ensure that appropriate safeguards are in place to ensure confidentiality.
  • Designating a BSA Compliance Officer – This pillar may not be appropriate for a collaborative arrangement because of the risks to the confidentiality of suspicious activity reports and the need for coordination of day-to-day BSA/AML compliance needs. Further, a BSA officer of more than one bank may have difficulty establishing effective communication channels with each bank’s board and senior management.  It may be more feasible for such an arrangement if the banks are affiliated.
  • Training Personnel – The availability and cost of an effective and qualified BSA/AML instructor may be a challenge in some markets. A collaborative arrangement may help banks to hire the right person needed to appropriately train bank personnel.

Please click here for the press release and here for the joint statement.

Fintech Week in Review – Week of September 24-28

The following is a summary of Fintech specific related topics, for the Blockchain Week in Review, please visit our sister blog post at the Virtual Currency Report.

Roundup of CFTC Resources

The Commodity Futures Trading Commission (CFTC) announced on September 20, 2018 that it would hold an open meeting on September 27, 2018 to discuss fintech cooperation agreements, among other topics not directly related to virtual currencies. The CFTC cancelled the open meeting on September 26, 2018, indicating that the agenda items were “resolved through the Commission’s seriatim process.” It is unclear how the matter on fintech cooperation arrangements was handled and whether there will be a subsequent meeting open to the public or related announcement.

The CFTC’s LabCFTC is co-hosting its first fintech conference, entitled “FinTech Forward 2018,” on October 3-4, 2018 in Washington, D.C. Speakers will include domestic and international financial regulators discussing a range of topics, from emerging technology, market and regulatory trends to the role of artificial intelligence. The conference is full but interested participants can sign up for the waitlist or watch the livestream on the CFTC’s homepage.

The CFTC’s Technology Advisory Committee (TAC) announced it will be holding a public meeting on October 5, 2018 that will be webcast live on the CFTC’s website. No definitive agenda has been released. The meeting’s primary topic appears to be RegTech, but the meeting will also involve presentations from select subcommittees of the TAC, which may include the Virtual Currencies subcommittee.

LabCFTC is going on the road with Office Hours in Austin, Texas on October 23-24, 2018, which will provide FinTech entrepreneurs, investors and others to discuss issues, ask questions or give a presentation to LabCFTC staff.

The above is a summary of one of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.  These are the Fintech updates that ties to the post Blockchain in Review – Week of September 24-28, 2018 from our sister blog, VirtualCurrencyReport.

Fintech Week in Review: Week of September 10-17, 2018

The following is a summary of Fintech specific related topics, for the Blockchain Week in Review, please visit our sister blog post at the Virtual Currency Report.

State Bank Regulators and NYDFS to renew litigation against OCC

On September 12, the Conference of State Bank Supervisors (“CSBS”) announced that it would renew litigation efforts in opposition to the Office of the Comptroller of the Currency’s (“OCC”) decision to accept applications from financial technology firms for a special purpose national bank (“SPNB”) charter. A D.C. federal district court dismissed the CSBS’ first lawsuit on April 30, 2018 for failure to establish injury as the OCC had not yet determined if it would offer such a charter. In July of this year, the OCC said it would offer SPNB charters to fintech firms and it was announced earlier this month that Varo Money had received preliminary approval for the first SPNB charter. In the initial lawsuit, the CBS argued that the OCC”s 2017 proposal exceeded the authority granted to the OCC by Congress under the National Bank Act (“NBA”) and other federal banking laws to charter institutions that engage in banking. New York’s Department of Financial Services (“NYDFS”) filed a lawsuit against the OCC in federal court in Manhattan on September 14, 2018 alleging similar claims against the OCC of overstepping its authority in creating a charter.

CSBS Press Release

The above is a summary of one of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.  These are the Fintech updates that ties to the post Blockchain in Review – Week of September 10-17, 2018 from our sister blog, VirtualCurrencyReport.

Fintech Week in Review: Week of September 3 – 7, 2018

The following is a summary of Fintech specific related topics, for the Blockchain Week in Review, please visit our sister blog post at the Virtual Currency Report.

Varo Bank Receives Preliminary Approval for a National Bank Charter

On September 4, the organizers of the fintech start up Varo Bank, N.A. announced that they have been granted preliminary approval by the Office of the Comptroller of the Currency (“OCC”) for their application to form a de novo national bank. The charter will allow Varo to expand its financial products across the United States, largely preempting state financial regulatory licensing processes for certain money transmission activities. The OCC announced earlier this month that it would begin accepting national bank charter applications from fintech companies. Accordingly, Varo is the first fintech to receive preliminary approval under the new application process. For more information about the OCC national bank charter application process for fintech companies please see our regulatory update here.

Please click here for the press release.

The above is a summary of one of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.  These are the Fintech updates that ties to the post Blockchain in Review – Week of September 3 – September 7, 2018 from our sister blog, VirtualCurrencyReport.

Fintech in Review – Week of August 20 – 24, 2018

The following is a summary of Fintech specific related topics, for the Blockchain Week in Review, please visit our sister blog post at the Virtual Currency Report.

U.S. Chamber of Commerce Announces FinTech Innovation Initiative

The U.S. Chamber of Commerce released “FinTech Innovation Initiative: Bridging the Gap Between Tech and D.C.”  The document includes a number of guiding principles for the FinTech industry, which include, among other things, promoting “new and innovative ways to access capital, such as initial coin offerings (ICOs), while advocating for tailored oversight and strong consumer and investor protections.”  The document urges the CFTC and SEC to provide additional guidance on the regulatory treatment of token sales and “broadly consider and issue expedited no-action letters.”

The above is a summary of one of the significant legal and regulatory actions that occurred over the past week. This alert is not intended to be a comprehensive list of all such developments, but rather a selection of publicly-reported news that may be of particular interest.  These are the Fintech updates that ties to the post Blockchain in Review – Week of  August 20 – 24, 2018 from our sister blog, VirtualCurrencyReport.

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