InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Chamber of Commerce requests access to FTC privacy-related communications
On November 19, the U.S. Chamber of Commerce sent FOIA requests to the FTC seeking, among other things, communications on consumer data privacy policies the FTC has discussed or considered as ordered by President Biden’s broad July 9 executive order, which tasked the FTC with establishing rules to address concerns about “unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy.” (Covered by InfoBytes here.) The Chamber is seeking all communications between FTC Chair and Commissioner Lina Khan and former commissioner Rohit Chopra related to the FTC’s Penalty Offense Authority and/or enforcement policy statements addressing privacy-related topics, as well as communications with the Center on Privacy and Technology at Georgetown Law. As previously covered by InfoBytes, the Center’s founder, Alvaro Bedoya, was nominated in September by President Biden to serve as an FTC commissioner. With respect to the requests for records related to the FTC’s Penalty Offense Authority, over the past few months the FTC has issued several warnings using its Penalty Offense Authority related to false money-making claims, misleading online endorsements, and unlawful for-profit education institution practices. (Covered by InfoBytes here, here, and here.) Among other things, the FOIA letters also request all records related to artificial intelligence, including communications between the FTC and the White House Office of Science and Technology Policy and/or the CFPB.
Biden nominates Powell and Brainard
On November 22, President Biden selected Jerome Powell to serve a second term as Chair of the Federal Reserve Board and nominated Fed Governor Lael Brainard to serve as Vice Chair of the Board of Governors, replacing current Vice Chair Richard Clarida. The White House highlighted Powell’s “steady leadership during an unprecedently challenging period, including the biggest economic downturn in modern history and attacks on the independence of the Federal Reserve,” and applauded Powell and Brainard’s shared “focus on ensuring that economic growth broadly benefits all workers.” The White House noted that both nominees are advancing key Biden administration priorities, including addressing climate-related financial risks and staying ahead of emerging risks to the country’s financial system. Powell issued a statement on his nomination, thanking President Biden for the opportunity to continue to serve as Chair and highlighting several key priorities, including “vigilantly guarding the resilience and stability of the financial system, addressing evolving risks from climate change and cyber attacks, and facilitating the modernization of the payments system while protecting consumers.” Brainard also released a statement affirming her commitment to serving all Americans and ensuring the Fed reflects the diversity of the communities it serves. President Biden still needs to fill three open seats on the Board, including the position of Vice Chair for Supervision. The White House stated that President Biden intends to announce the additional nominations in early December.
OFAC designates entities and individuals, issues general license and related Ethiopian FAQs
On November 12, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced sanctions pursuant to Executive Order (E.O.) 14046 against four entities and two individuals associated with the military conflict and human rights crisis in Ethiopia. OFAC noted that the E.O., which was signed by President Biden on September 17, authorized targeting of actors that contribute to the ongoing crisis in Ethiopia and is not directed at Ethiopian or Eritrean people (covered by InfoBytes here). As a result of the sanctions, all property and interests in property belonging to the sanctioned entities and individuals subject to U.S. jurisdiction are blocked and must be reported to OFAC. OFAC further noted that no entity is to be blocked “pursuant to E.O. 14046 solely because it is owned in whole or in part, directly or indirectly, by one or more sanctioned persons, unless the entity is itself a sanctioned person.”
The same day, OFAC issued Ethiopia General License 4, “Authorizing the Wind Down of Transactions Involving Hidri Trust or Red Sea Trading Corporation,” which are two of the four entities for which sanctions were announced. Ethiopia General License 4 authorizes “all transactions and activities prohibited by Executive Order (E.O.) 14046 that are ordinarily incident and necessary to the wind down of transactions involving Hidri Trust or Red Sea Trading Corporation” through December 14, provided certain criteria are met. OFAC also updated FAQ 927, which provides clarification on non-U.S. persons’ risk exposure to U.S. sanctions for engaging in transactions and activities that would be authorized for U.S. persons pursuant to the prior E.O. of September 17. Additionally, OFAC published two new FAQs (935 and 936), which provide further information on Ethiopia-related sanctions.
President Biden extends national emergency prohibiting securities investments in Chinese military companies
On November 9, President Biden issued a notice, extending for one year, the national emergency declared pursuant to Executive Order (E.O.) 13959, as expanded by E.O. 14032, involving securities investments related to Chinese military companies. As previously covered by InfoBytes, E.O. 14032 generally prohibits U.S. persons from “the purchase or sale of any publicly traded securities, or any securities that are derivative of such securities, or are designed to provide investment exposure to such securities, of” any listed Chinese military company. The E.O. also establishes deadlines for divestment of investments in companies currently listed as Chinese military companies as well as companies that later may be added to the list of Chinese military. Among other things, E.O. 14032 also prohibits any transactions by U.S. persons or within the U.S. that evade or avoid, have the purpose of evading or avoiding, cause a violation of, or attempt to violate the provisions set forth in the order, as well as any conspiracy to violate any of these prohibitions.
In continuing the national emergency underlying these actions and extending E.O. 14032, Biden stated the “threat from securities investments that finance certain companies of the [People’s Republic of China] and certain uses and development of Chinese surveillance technology continue to pose an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States.”
5th Circuit stays OSHA mandate
On November 12, the U.S. Court of Appeals for the Fifth Circuit issued a nationwide stay on the emergency temporary standard (ETS), which mandates that all employers with 100 or more employees require employees to be fully vaccinated or be subject to a weekly Covid-19 test. As previously covered by InfoBytes, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) published a rule in the Federal Register requiring employers to develop, implement, and enforce a mandatory Covid-19 vaccination policy, unless they adopt a policy requiring employees to choose between vaccination or regular testing for Covid-19 and wearing a face covering at work. The 5th Circuit stay, which was in response to a legal challenge filed by several states along with private entities and individuals, affirmed the court’s initial stay. According to the appellate opinion, OSHA’s enforcement of this ETS is illegitimate, calling it “unlawful” and “likely unconstitutional.” Furthermore, the 5th Circuit ordered OSHA to “take no steps to implement or enforce the Mandate until further court order.”
OCC, Fed, and Treasury issue statements on climate change
On November 3, the OCC, the Federal Reserve, and the U.S. Treasury Department released statements expressing support for the Network for Greening the Financial System (NGFS) Glasgow Declaration. OCC acting Comptroller Michael J. Hsu noted in a statement that the OCC is developing “high-level climate risk management supervisory expectations for large banks” and expects to issue the framework guidance for comment “by the end of the year.” Hsu also noted that the OCC will implement recommendations of the FSOC Climate Change Report, which was released in response to President Biden’s May executive order, and directed financial regulators to take steps to mitigate climate-related risk related to the financial system (covered by InfoBytes here). In a statement by Treasury Secretary Yellen, she discussed the importance of tackling climate change, stating that it is “the greatest economic opportunity of our time,” and noted the U.S. is “calling on the multilateral development banks to increase their efforts.” The Fed noted in a statement that it is committed to understanding and addressing climate change and, furthermore, “will address climate-related risks in an analytically rigorous, transparent, and collaborative way through our domestic work with other federal agencies including the Financial Stability Oversight Council; our international engagement through the Financial Stability Board, the Basel Committee on Banking Supervision, and the NGFS; and through our broad and transparent engagement with the private sector.”
Biden announces key FCC nominees
On October 26, President Biden nominated acting FCC Chair Jessica Rosenworcel to be permanent Chair of the FCC. According to the announcement, in her time at the FCC, Rosenworcel has focused on addressing illegal robocalls and worked to enhance consumer protections in the agency’s telecommunications policies. Prior to joining the FCC, Rosenworcel served as Senior Communications Counsel for the United States Senate Committee on Commerce, Science, and Transportation. Biden also nominated Gigi Sohn, currently a Distinguished Fellow at the Georgetown Law Institute for Technology Law & Policy, to be a Commissioner. Biden’s announcement highlighted Sohn’s work pertaining to competition, innovation, and access to the Internet. The FCC’s leadership will be fully staffed at five members if Rosenworcel and Sohn are confirmed as commissioners.
FSOC directs regulators to take measures to mitigate climate-related financial risks
On October 21, the Financial Stability Oversight Council (FSOC) released a new report in response to President Biden’s May executive order, which directed financial regulators to take steps to mitigate climate-related risk related to the financial system. The Report on Climate-Related Financial Risk (see also FSOC’s fact sheet) identified more than 30 specific recommendations for member agencies, including that members should: (i) expand capacity and efforts “to define, identify, measure, monitor, assess, and report on climate-related financial risks and their effects on financial stability,” including through “investments in staffing, training, expertise, data, analytic and modeling methodologies, and monitoring”; (ii) promptly conduct an internal inventory of currently available data and develop plans for acquiring necessary additional data to fill climate-related data and methodological gaps; (iii) review existing public disclosure requirements and consider updating public reporting requirements in a way that would build on the work of the Task Force on Climate-Related Financial Disclosures; and (iv) continue to assess and mitigate climate-related risks to financial stability, including through scenario analysis, and evaluate whether revised or new regulations or guidance is necessary to clarify expectations for regulated or supervised institutions. The report also called for enhanced coordination across member agencies, and said a Climate-related Financial Risk Committee will be formed to “identify priority areas for assessing and mitigating climate-related risks to the financial system and serve as a coordinating body to share information, facilitate the development of common approaches and standards, and foster communication across FSOC members.” A Climate-related Financial Risk Advisory Committee will also be formed to help gather information and analysis from stakeholders on climate-related financial risks. Treasury Secretary Janet Yellen warned that FSOC has a responsibility under the Dodd-Frank Act “to respond to emerging threats to the stability of the United States financial system” and to “ensure the resilience of the financial system to the future impacts of climate change.”
Agencies announce new measures to combat ransomware
On October 15, the U.S. Treasury Department announced additional steps to help the virtual currency industry combat ransomware and prevent exploitation by illicit actors. The guidance builds upon recent “whole-of-government” actions focused on confronting “criminal networks and virtual currency exchanges responsible for laundering ransoms, encouraging improved cyber security across the private sector, and increasing incident and ransomware payment reporting to U.S. government agencies, including both Treasury and law enforcement.” (Covered by InfoBytes here.) The newest industry-specific guidance—part of the Biden administration’s efforts to counter ransomware threats—outlines sanctions compliance best practices tailored to the unique risks associated with this space. According to Treasury, there is a “need for a collaborative approach to counter ransomware attacks, including public-private partnerships and close relationships with international partners.”
The same day, the Financial Crimes Enforcement Network (FinCEN) released new data analyzing ransomware trends in Bank Secrecy Act reporting filed between January 2021 and June 2021. The report follows FinCEN’s government-wide priorities for anti-money laundering and countering the financing of terrorism priorities released in July (covered by InfoBytes here). Issued pursuant to the Anti-Money Laundering Act of 2020, the report flags “ransomware as a particularly acute cybercrime concern,” and states that in the first half of 2021, FinCEN identified $590 million in ransomware-related suspicious activity reports (SARs)—an amount exceeding the entirety of the value report in 2020 ($416 million). If this trends continues, FinCEN warns that ransomware-related SARs submitted in 2021 will have a higher transaction value than similar SARs filed in the previous 10 years combined. FinCEN attributes this uptick in activity to several factors, including an increasing overall prevalence of ransomware-related incidents, improved detection and incident reporting, and an increased awareness of reporting obligations and willingness to report by financial institutions.
In conjunction with the “growing prevalence of virtual currency as a payment method,” Treasury’s Office of Foreign Assets Control (OFAC) issued sanctions compliance guidance for companies in the virtual currency industry, including technology companies, exchangers, administrators, miners, wallet providers, and financial institutions. OFAC warned that “sanctions compliance obligations apply equally to transactions involving virtual currencies and those involving traditional fiat currencies,” and that participants “are responsible for ensuring that they do not engage, directly or indirectly, in transactions prohibited by OFAC sanctions, such as dealings with blocked persons or property, or engaging in prohibited trade- or investment-related transactions.” Among other things, the guidance will assist participants on ways to evaluate risks and build a risk-based sanctions compliance program. OFAC also updated related FAQs 559 and 646.
Biden outlines actions to mitigate climate-related financial risks
On October 15, the Biden administration issued a Fact Sheet outlining actions for building economic resilience to the impact of climate change. Among other things, the Fact Sheet is a “comprehensive, government-wide strategy to measure, disclose, manage and mitigate the systemic risks climate change poses to American families, businesses, and the economy,” and expands upon recent actions taken by the administration. The administration’s “whole-of-government strategy” discusses six pillars to achieve the goals outlined in Biden’s May 2021 Executive Order on Climate-Related Financial Risks (covered by InfoBytes here). One of the pillars—promoting the resilience of the U.S. financial system to climate-related financial risks—refers to recently issued SEC guidance stating that companies may be required to include information concerning climate-change risks and opportunities in “disclosures related to a company’s description of business, legal proceedings, risk factors, and management’s discussion and analysis of financial condition and results of operations.” (Covered by InfoBytes here.) The other five pillars are: (i) protecting life savings and pensions from climate-related financial risk; (ii) using federal procurement to address climate-related financial risk; (iii) incorporating climate-related financial risk into federal financial management and budgeting; (iv) incorporating climate-related financial risk into federal lending and underwriting; and (v) building resilient infrastructure and communities.