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Agency officials urge Congress to create central repository to combat money laundering
On May 21, the Senate Committee on Banking, Housing, and Urban Affairs held a hearing entitled “Combating Illicit Financing By Anonymous Shell Companies Through the Collection of Beneficial Ownership Information.” The Committee heard from the same panel of witnesses who testified in November on the need for modernization of the Bank Secrecy Act/Anti-Money Laundering regime. (Covered by InfoBytes here.) Committee Chairman Mike Crapo opened the hearing by stressing the need to discuss ways in which beneficial ownership information collected in an effort to deter money laundering and terrorist financing through anonymous shell companies can be made more useful. Panelists from the Financial Crimes Enforcement Network, the FBI, and Office of the Comptroller of the Currency all emphasized the importance of creating a regime in which beneficial ownership is collected at the corporate formation stage and, for foreign entities, upon the time of registration with U.S. states to conduct business or upon establishing an account with a U.S. financial institution.
FTC Commissioners discuss state privacy preemption
On May 8, the FTC Commissioners participated in a subcommittee hearing before the House Committee on Energy and Commerce entitled, “Oversight of the Federal Trade Commission: Strengthening Protections for Americans’ Privacy and Data Security.” During the hearing, the Commissioners were questioned about the agency’s privacy and data security enforcement and regulatory activities, including whether they would support preemption of state privacy laws by a federal privacy statute. Using the California Consumer Privacy Act (covered by InfoBytes here) as an example, some Congressmen worried about the prospect of conflicting privacy legislation in other states, creating “confusion and uncertainty in the business community.”
Split along party lines, Democratic Commissioners expressed caution with federal preemption of state privacy laws; Commissioner Chopra, citing to federal preemption laws leading up to the mortgage crisis, warned of “unintended consequences.” Democratic Commissioner Slaughter recognized the “desire for uniformity, consistency, clarity, and predictability” that a federal law would provide, but noted that the appropriateness of preemption should be based on “whether a federal law meets or exceeds…the level of protections that states can provide and whether it allows them the opportunity to fill any gaps that may remain after a federal law is developed.” Republican Commissioners stressed the importance of having a federal law that would preempt the current “patchwork” of state laws, which Commissioner Phillips argued is “essential” in order to provide businesses clarity and reduced compliance costs, while also providing consumers with more power to understand expectations. FTC Chairman Simons noted that even if federal law preempts state privacy laws, Congress should grant concurrent enforcement authority to the states’ attorneys general.
The hearing also discussed, among other things, (i) the need for additional resources to increase agency staff focused on privacy issues; (ii) giving the FTC authority to levy civil money penalties, as Section 5 of the FTC act does not allow the Commission to seek civil penalties for first-time privacy violations; and (iii) the need for targeted rule-making authority.
House Diversity and Inclusion Subcommittee holds first hearing
On February 27, the newly formed Diversity and Inclusion Subcommittee of the House Financial Services Committee held its first-ever hearing to examine trends in diversity in the financial services industry, including management-level diversity and diversity among potential talent pools. The hearing reviewed the November 2017 GAO Report on “Representation of Minorities and Women in Management and Practices to Promote Diversity, 2007-2015” with the Director of Financial Markets and Community Investment of GAO, David Garcia-Diaz, as its only witness. The hearing focused on the report’s conclusion that in the financial services industry, there were marginal increases in minority representation in management positions while women’s representation remained unchanged from 2007 to 2015. Representatives noted the importance of diversity and inclusion in a financial institution’s work force and requested Garcia-Diaz discuss the best practices to increase employment diversity. Among other things, Garcia-Diaz noted that in order to increase diversity financial institutions should (i) engage in broad-based recruitment; (ii) establish mechanisms to hold managers accountable, such as linking manager compensation to diversity goals; and (iii) use data analysis to assess the diversity in the organization in order to develop an intentional plan to address the issue.
The committee memorandum is available here.