Bank Law Monitor

Bank Law Monitor

A Legal Blog for the Financial Services Industry

Hemp-Banking Guidance Leaves a Lot of Questions

Posted in Cannabis

The financial services industry has been waiting with bated breath for guidance from its regulators on banking hemp and hemp-derivatives like CBD. On Tuesday, December 3, federal regulators issued a joint statement attempting to “provide clarity” on the issue. Unfortunately, that guidance had landed with a distinct thud.

Rather than providing practical guidance to the industry or a roadmap to banking hemp businesses, the regulators simply directed banks to confirm that their customers are operating in compliance with all federal and state laws, and to call the USDA or FDA if they have any questions about what that means. In the statement, financial institutions were also directed by FinCEN to stop automatically filing SARs in connection with hemp business activities, so long as the businesses are operating in full compliance with laws. Again, financial institutions are urged to call other non-banking federal and state agencies, such as the USDA or FDA (or states or tribes), if they need help figuring that out. Continue Reading

Bankers Beware—Trade Secret Misappropriation Can Lead to Lifetime Ban

Posted in Intellectual Property

Employees change jobs all the time. There is generally nothing wrong with an employee planning his or her next move while still employed. But when an employee’s plans include gathering up his or her employer’s trade secrets to use at a new place of employment, that calculus changes. An employee who shares his or her current employer’s confidential information with the new employer may be liable for trade secret misappropriation, and the new employer can be held liable for that unlawful disclosure as well. Indeed, as we have explained here before, Washington courts still sometimes enforce a duty of confidentiality that will protect information that may not rise to the level of an actual trade secret, but that the former employer nonetheless considers to be confidential. Continue Reading

FinCEN Reverses Course on Beneficial Ownership Requirements in Connection with Loan Renewals and Modifications

Posted in Banking, Regulatory Developments

It can be hard for regulatory agencies to admit when they’ve made a mistake. But that’s exactly what FinCEN did last week when it announced that certain loan renewals and modifications[1] would not trigger its beneficial ownership due diligence rule (the “Rule”), reversing its earlier guidance on the subject. FinCEN’s change of heart is welcome relief for the industry, which decried FinCEN’s earlier position as failing to meaningfully advance any law enforcement goals while imposing unnecessarily costly new requirements to conduct due diligence in connection with already established loans with known business customers.

The Rule requires financial institutions to take various steps to verify the identity of beneficial owners of corporations, LLCs, and other legal entity customers who open a “new account” (such as a loan, deposit account, line of credit, etc.). In particular, the Rule requires financial institutions to “look through” certain types of entities and gather information about the individuals that own and/or control them. The overall purpose of the Rule is to improve financial transparency and prevent criminals and terrorists from hiding behind the opaque curtain of corporate ownership to disguise their illegal activities. And since bankers are already accustomed to Know-Your-Customer obligations, much of what was contained in the Rule wasn’t all that controversial (aside from adding yet another layer of compliance and cost). Continue Reading

The Shifting Sands of Washington’s Consumer Loan Act

Posted in Banking, CFPB, Mortgage Servicing

Since the Great Recession, the regulation of residential mortgages and those who service them have been in sharp focus. Legislators and regulators continue to demonstrate an abiding mistrust in the servicing industry a full decade after the financial collapse—imposing and then tinkering with a regulatory scheme that is challenging for most people (and most lawyers, for that matter!) to fully comprehend.

In Washington alone, the regulations governing Washington’s Consumer Loan Act (CLA) have already been updated at least four times in the last six years. 2018 brings yet another set of regulatory changes  from the Washington Department of Financial Institution (DFI). The purpose of these latest revisions is to clarify the rules for investors, owners, and servicers of residential mortgage loans. They also attempt, in some instances, to harmonize Washington law with federal regulations for mortgage loan servicers. The new rules take effect September 1, 2018. Below is a summary of some of the major changes. Continue Reading