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  • EU-U.S. release statement on Joint Financial Regulatory Forum

    Federal Issues

    On July 20, participants in the U.S.-EU Joint Financial Regulatory Forum, including officials from the Treasury Department, Federal Reserve Board, CFTC, FDIC, SEC, and OCC, issued a joint statement regarding the ongoing dialogue that took place from June 27-28, noting that the matters discussed during the forum focused on six themes: “(1) market developments and financial stability risks; (2) regulatory developments in banking and insurance; (3) anti-money laundering and countering the financing of terrorism (AML/CFT); (4) sustainable finance and climate-related financial risks; (5) regulatory and supervisory cooperation in capital markets; and (6) operational resilience and digital finance.”

    Participants acknowledged that the financial sector in both the EU and the U.S. is exposed to risk due to ongoing inflationary pressures, uncertainties in the global economic outlook, and geopolitical tensions as a result of Russia’s war on Ukraine. During discussions, participants emphasized the significance of strong bank prudential standards, effective resolution frameworks, and robust supervision practices. They also stressed the importance of international cooperation and continued dialogue to monitor vulnerabilities and strengthen the resilience of the financial system. Participants took note of recent developments relating to, among other things, recent bank failures, digital finance, the crypto-asset market, and the potential adoption of central bank digital currencies.

    Federal Issues Bank Regulatory Financial Crimes Digital Assets Of Interest to Non-US Persons EU Department of Treasury Federal Reserve CFTC FDIC SEC OCC Anti-Money Laundering Combating the Financing of Terrorism

  • CFPB holds hearing on medical billing and collections

    Federal Issues

    On July 11, CFPB Director Rohit Chopra delivered prepared remarks at a public hearing on medical billing and collections. Chopra commented on the prevalence of medical debt in the country, which affects over 100 million Americans, while $433.2 billion of the national GDP is sourced from consumers’ out-of-pocket expenses. Specifically, the CFPB hearing addressed the effects of medical payment products, including special-purpose credit cards and installment loans used to cover the cost of medical treatment, which Chopra claimed can leave patients “worse off.” The Bureau highlighted the predatory nature of such medical credit cards, which typically have a higher interest rate than other cards and are often presented to consumers by their providers. According to Chopra, the Bureau recently launched a public inquiry (covered by InfoBytes here) to answer questions related to these products.

    During the expert panel discussion, multiple panelists raised issues regarding the federal requirements for hospital financial assistance programs that exist in exchange for tax benefits. Panelists criticized the complicated processes patients must follow for such programs and compared it to the simple and fast online application process for medical credit cards. Panelists also highlighted the need to include stronger, clearer federal requirements for hospital financial assistance programs, such as setting standards on income and setting minimums or floors, so consumers can access such services more easily. Panelists commonly noted that state requirements for hospital financial assistance programs are more robust than the federal requirements. In response to Chopra’s question on what the panelists wish to see from the Bureau regarding regulation, one panelist asked for a ban on deferred interest, noting the “special regulatory authority” the Bureau has. Another panelist requested that the agency ban medical credit cards from being offered in a medical setting, citing her communication with clients who claim they feel “pressured” to sign the paperwork in that setting. Additionally, another panelist requested that the Bureau prohibit the reporting of medical debt on credit reports—mentioning Colorado’s headway in being the first state to ban such reporting and noting the Bureau’s potential to ban it at a federal level. The panelists each applauded the agency’s efforts to bolster regulations on medical payment products.

    Federal Issues Agency Rule-Making & Guidance CFPB DHHS Department of Treasury Credit Cards Consumer Finance Medical Debt Installment Loans

  • CFPB launches medical-debt inquiry with HHS and Treasury

    Agency Rule-Making & Guidance

    On July 7, the CFPB, Department of Health and Human Services, and the Treasury Department announced they are looking into high-cost specialty financial products such as medical credit cards and installment loans used by patients to pay for health care. These products, the agencies explained, were once primarily used to pay for medical treatments not traditionally covered by health insurance but may now be more widely used even when medical care may be covered by insurance or financial assistance. The agencies released a request for information (RFI) seeking feedback on a range of topics, including costs associated with medical payment products, how prevalent the products are, health care providers’ incentives to offer these products to patients, and whether patients fully understand the risks and consequences associated with medical payment products.

    Specifically, the agencies are soliciting comments “on whether these products may allow health care providers to operate outside of a broad range of patient and consumer protections.” Feedback is also requested on whether use of these products is contributing to health care cost inflation, displacing hospitals’ provision of financial assistance, causing patients to pay inaccurate or inflated medical bills, increasing the amount patients must pay due to financing costs, or otherwise contributing to consumer harm, including through downstream credit reporting and debt collection practices. The agencies also want to know if using these products is creating disparities across different demographic groups, as well as policy options to protect consumers from harm.

    The agencies commented that the RFI will assist in their understanding of consumer harms and financial challenges caused by specialty medical payment products and will serve to guide next steps, including future Bureau actions focusing on credit origination, debt collection, and credit reporting practices of the financial companies that originate and service these products.

    Comments on the RFI are due within 60 days of publication in the Federal Register.

    Additionally, the Bureau is hosting a hearing on July 11 to address medical billing and collection concerns with a focus on medical payment products.

    Agency Rule-Making & Guidance Federal Issues CFPB Department of Health and Human Services Department of Treasury Credit Cards Consumer Finance Installment Loans

  • OFAC sanctions Mexico-based human smuggling organization

    Financial Crimes

    The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) recently announced sanctions pursuant to Executive Order 13581 against a human smuggling organization, and several individuals and entities in its support network. OFAC claimed the Mexico-based organization, Hernandez Salas transnational criminal organization (TCO), earns billions of dollars per year smuggling and creating false documentation for migrants. The leader of the TCO has been sanctioned, among four other supporters. OFAC reported that the individuals are currently incarcerated in Mexico and awaiting extradition to the U.S. for trial before a federal grand jury. Also sanctioned are two Mexican hotels that have taken part in the TCO’s smuggling operations. OFAC noted that the sanctions were pursued in close collaboration with Mexico’s Financial Intelligence Unit.

    As a result of the sanctions, all property and interests in property belonging to the sanctioned persons subject to U.S. jurisdiction are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are also generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Department of Treasury SDN List Mexico

  • OFAC sanctions Burma Ministry of Defense and supporting financial institutions

    Financial Crimes

    On June 21, pursuant to Executive Order 14014, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions against Burma’s Ministry of Defense and two regime-controlled financial institutions. In announcing the sanctions, OFAC explained that the Burmese military, which overthrew the country’s democratic government in February 2021, has increased its reliance on air strikes in civilian populated areas, resulting in the death of more than 3,600 civilians and displacing nearly than 1.5 million people, and that Burma’s Ministry of Defense has imported goods from sanctioned entities in Russia to support the Burmese military. OFAC detailed that the two sanctioned financial institutions, which primarily function as foreign currency exchanges, “enable Burma’s Ministry of Defense and other sanctioned military entities to purchase arms and other materials from foreign sources.” As a result of the sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Additionally, “any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are generally prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless authorized by a general or specific OFAC license, or if otherwise exempt.

    In conjunction with the sanctions, OFAC issued a Burma-related special license (See General License 5).

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Department of Treasury Burma Russia SDN List

  • Waters asks Treasury, SEC to comment on crypto framework

    Federal Issues

    On June 23, Representative Maxine Waters solicited viewpoints, analysis, and recommendations in letters sent to the Department of Treasury and the SEC regarding a recently introduced discussion draft of cryptocurrency framework. In her letters, Waters requested insight on how the proposed legislation would impact the federal regulators’ ability to conduct oversight, among other things. Waters specifically asked the SEC for recommended amendments to existing law, outside of the bill, to further protect investors in the digital assets space. In her letter to the Treasury, she asked for insight on how the bill would address or conflict with its policy recommendations, and if the bill or specific provisions of it are needed. Waters requested that both regulators provide a written response by June 30 and be prepared to brief the House Financial Services Committee.

    Introduced on June 2, the discussion draft to which Waters referred would impact the jurisdiction of the CFTC over digital commodities and the SEC’s authority over digital assets. Committee Chairman Patrick McHenry is a co-author of the discussion draft and also the primary sponsor of newly proposed bills regarding financial statement requirements of emerging growth companies that if passed, will indirectly impact regulators’ oversight in the crypto space. HR 2608 would limit the financial information an emerging growth company would be required to submit to the SEC, among other things. Specifically, “an emerging growth company is not required to present a financial statement for any period prior to the earliest audited period of the emerging growth company in connection with its initial public offering, such as a statement for an acquired company.” Additionally, HR 2610 would amend the Securities Exchange Act of 1934, so emerging growth companies would only need to submit the last 2 years of their profit and loss statements (previously 3 years). Among other things, the bill allows an issuer of securities to submit a draft registration statement to the SEC for confidential review prior to a public filing. Both bills have passed the House. 

    Federal Issues Digital Assets Fintech Federal Legislation CFTC Cryptocurrency Department of Treasury SEC U.S. House

  • OFAC sanctions DPRK missile development procurers

    Financial Crimes

    On June 15, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Orders (E.O.) 13382 and 13810, against two individuals involved in the procurement of equipment and materials that support the Democratic People’s Republic of Korea’s (DPRK) ballistic missile program. According to OFAC, the missile program relies on foreign-sourced ballistic missile-related components that it cannot produce domestically. One of the sanctioned persons has collaborated with a number of individuals to purchase and procure items including those known to be used in the production of DPRK ballistic missiles. The individual’s wife is the second sanctioned individual listed as “being a North Korean person, including a North Korean person that has engaged in commercial activity that generates revenue for the Government of North Korea or the Workers’ Party of Korea.”

    As a result of the sanctions, all property and interests in property of the designated persons that are in the U.S., or in the possession or control of U.S. persons, are blocked and must be reported to OFAC. In addition, any entities that are owned, directly or indirectly, 50 percent or more by one or more blocked persons are also blocked. OFAC further mentioned, “any foreign financial institution that knowingly facilitates a significant transaction or provides significant financial services for any of the individuals or entities designated today could be subject to U.S. correspondent or payable-through account sanctions.”

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Sanctions OFAC Designations Department of Treasury China North Korea SDN List

  • OFAC sanctions Russians for election influence

    Financial Crimes

    On June 23, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions, pursuant to Executive Order 14024, against two individuals for attempting to conduct “global malign influence operations,” including efforts to influence a U.S. local election. According to OFAC, the designated individuals are Russian Federal Security Service officers who operate as part of a mission that provokes anti-government and anti-democratic positions designed to undermine faith in democratic principles, weaken U.S. diplomatic connections, and exploits societal divisions in an effort to expand Russia’s influence. OFAC said one of the individuals directed more than six U.S. co-conspirators, including two who ran in local U.S. elections, to report on the activities of political groups. OFAC designated the two individuals “for having acted or purported to act for or on behalf of, directly or indirectly, the Government of the Russian Federation.” The designated individuals were also recently indicted by the DOJ as well as by the U.S. Attorney’s Office for the Middle District of Florida. In a parallel action announced the same day, the EU released its Eleventh Package of sanctions against Russia. The Eleventh Package added, among other things, over 100 individuals and entities subject to asset freezes, a new anti-circumvention tool to restrict the trade of sanctioned goods, and 87 new entities to the list of those directly supporting Russia’s military and industrial complex in the war against Ukraine.

    As a result of these sanctions, all property and interests in property belonging to the sanctioned persons that are in the U.S. or in the possession or control of U.S. persons are blocked and must be reported to OFAC. Further, “any entities that are owned, directly or indirectly, individually or in the aggregate, 50 percent or more by one or more blocked persons are also blocked.” U.S. persons are prohibited from engaging in any dealings involving the property or interests in property of blocked or designated persons, unless exempt or authorized by a general or specific OFAC license. Additionally, OFAC warned that financial institutions and other persons that engage in certain transactions or activities with the sanctioned persons may themselves be exposed to sanctions or be subject to an enforcement action.

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Department of Treasury Ukraine Russia SDN List

  • Yellen discusses development banks in Paris speech

    Federal Issues

    On June 23, U.S. Treasury Secretary Janet L. Yellen attended the Summit for a New Global Financing Pact in Paris, during which she delivered remarks on the continuing evolution of global financial architecture. Yellen first touched upon an initiative to evolve multilateral development banks’ (MDBs) ability to tackle global challenges, including climate change, pandemics, poverty, and conflicts. She highlighted a recent achievement handled by a broad coalition of shareholders, which, according to Yellen, has the potential to unlock as much as $50 billion in additional lending capacity over the next decade and may lead to MDBs, as a system, unlocking “$200 billion in new lending capacity over the same timeframe through balance sheet measures that are either already under implementation or being deliberated.” Yellen also touched upon other initiatives relating to debt and macroeconomic stability, as well as private capital mobilization, during the summit.

    Federal Issues Department of Treasury Of Interest to Non-US Persons

  • OFAC settles with international financial institution

    Financial Crimes

    On June 20, the U.S Treasury Department’s Office of Foreign Assets Control (OFAC) announced a settlement with a Latvia-based bank—a subsidiary of an international financial institution headquartered in Sweden—to resolve potential civil liability stemming from OFAC’s Crimea sanctions. According to OFAC’s web notice, in 2015 and 2016, a shipping industry client of the Latvia-based subsidiary bank made 386 transactions totaling over $3 million through its e-banking platform from a Crimea-based IP address to persons in Crimea, which were processed through U.S. correspondent banks. OFAC alleges that in 2016, the client attempted to make a payment to a U.S. correspondent bank from a Crimea-based IP address, but after the payments were rejected and the bank was reassured by the client that the transactions did not involve Crimea, the bank rerouted the payment through a different U.S. correspondent bank. OFAC alleges that the bank had client onboarding information that the client had a physical presence in Crimea, so the bank had reason to know that the transactions in fact involved Crimea. OFAC also accused the bank of not integrating the client’s IP data into its sanctions screening processes.

    In arriving at the $3.4 million settlement amount, OFAC considered, among other things, that the bank willfully violated U.S. sanctions by not self-disclosing the violations, which is required as a third party. According to the OCC, the bank failed to exercise due caution or care in neglecting to account for the client’s presence in Crimea, and instead solely relied on the client’s reassurances when it possessed contradictory information. OFAC also claimed that the bank had many customers in Crimea, and therefore had reason to know the origin of the payments it was processing. OFAC also considered several mitigating factors, including that: (i) the bank has not received a penalty notice from OFAC in the preceding five years; (ii) the bank and the financial institution took remedial action; and (iii) the bank and the financial institution cooperated with OFAC’s requests for information.

    OFAC said that this action “demonstrates the importance of implementing and maintaining effective, risk-based sanctions compliance controls, especially for sophisticated financial institutions operating in proximity to high-risk regions.” OFAC added that this case also demonstrates the importance of undertaking reasonable efforts to investigate red flags. Finally, OFAC noted that this matter underscores the importance of remaining vigilant against efforts by entities based in Crimea, Russia, and other high-risk countries seeking to evade sanctions and elude compliance controls. 

    Financial Crimes Of Interest to Non-US Persons OFAC OFAC Designations OFAC Sanctions Department of Treasury Settlement Latvia Russia Enforcement

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