Bank Law Monitor

Bank Law Monitor

A Legal Blog for the Financial Services Industry

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

The OCC Doubles Down on Fintech Banks

Posted in Banking, Trending News

Traditional banks and lenders may soon see some increased competition from actors in the financial technology industry. As we previously discussed, the Office of the Comptroller of the Currency (OCC) has led the regulatory charge by inviting so-called “fintech” companies to apply for special purpose national bank charters. Soon after this invitation was extended in 2016, the Conference of State Bank Supervisors (consisting of state banking regulators) filed a lawsuit in 2017 hoping to block the OCC’s fintech charter, but the lawsuit was dismissed in 2018. With that lawsuit behind it, the OCC recently announced that it will begin accepting applications for special purpose charters from non-depository fintech companies, such as online lenders and payments companies.

The OCC’s announcement will likely stir up some strong feelings among those in the traditional banking and lending industries hoping to preserve the status quo. Here are a few things we can expect from the announcement: Continue Reading

The STATES Act—A Solution to the Cannabis Banking Problem on the Horizon?

Posted in Banking, Cannabis, Regulatory Developments

By Danielle Hunt, Kalin Bornemann, Olivia Grabacki, and Jessica Roberts

As we previously discussed, financial institutions that offer financial services to the cannabis industry have been operating in a state of uncertainty in the wake of the rescission of the so-called “Cole Memo” earlier this year. Without the comfort of the Cole Memo, those financial institutions nevertheless continued to operate under a set of guidelines previously published by the Financial Crimes Enforcement Network (FinCEN). As you can guess, most financial institutions have been wary to deal with individuals or businesses with ties to the recreational cannabis industry due to this lack of clear federal guidance. However, these times of uncertainty could soon be changing. With the fresh introduction of Senate Bill 3032, also known as the Strengthening the Tenth Amendment Through Entrusting States Act (the “STATES Act“), clarity and security could be on the horizon for financial institutions hoping to “take the plunge” and offer services to the cannabis industry.

Continue Reading