Weekly RoundUp
January 27, 2022

FinCEN Proposes Rule for SARs Sharing Pilot Program

In This Weekly Roundup Issue. The Financial Crimes Enforcement Network (FinCEN) issued a proposed rule about the establishment of a limited-duration pilot program for sharing suspicious activity reports (SARs); FinCEN published the final version of inflation adjustment for Civil Monetary Penalties (CMPs); the Federal Deposit Insurance Corporation (FDIC) published a final rule to simplify deposit insurance rules for trust and mortgage servicing accounts; the Consumer Financial Protection Bureau (CFPB) updated its Education Loan Examination Procedures; and the U.S. Securities and Exchange Commission (SEC) are requesting that paper courtesy copies no longer be sent. These and other developments are discussed in more detail below.

Regulatory Developments

FinCEN Issues Proposed Rule for SAR Sharing Pilot Program

On January 25, FinCEN issued a Notice of Proposed Rulemaking (NPR) about the establishment of a limited-duration pilot program for sharing SARs that, subject to certain conditions and approval by FinCEN, would allow a financial institution to share SARs and information related to SARs with the institution’s foreign branches, subsidiaries and affiliates for the purpose of combating illicit finance risks. The purpose of the pilot is to assist financial institutions in further combating illicit finance risks and provide FinCEN feedback about the value of SARs sharing. Previously, FinCEN issued guidance on sharing SARs on a financial institution’s foreign head offices, domestic or foreign controlling companies and domestic affiliates. The NPR seeks public comment on questions such as expected costs and benefits, whether a longer-term program is warranted, the reasonableness of conditions imposed by FinCEN for SAR sharing, and potential challenges. Comments are due by March 28, 2022.

FinCEN Publishes Final Rule for Inflation Adjustments to CMPs

On January 24, FinCEN published a final rule to reflect annual inflation adjustments to its CMPS, in order to improve the effectiveness of CMPs and to maintain their deterrent effect.

FDIC: Final Rule to Simplify Deposit Insurance Rules for Trust and Mortgage Servicing Accounts

On January 21, the FDIC published a final rule to amend the deposit insurance rules for trust and mortgage servicing accounts. For trust servicing accounts, the prior rules set forth different schemes applicable to revocable and irrevocable trusts. Under the new rule, revocable and irrevocable trust deposit insurance categories are merged into a new “trust account” category. A deposit owner’s trust deposits will be insured up to $250,000 for each trust beneficiary, for a maximum of five beneficiaries per owner. For mortgage servicing account deposits, the current rules provide deposit insurance on principal and interest funds in the mortgage servicing account for up to $250,000 per mortgagor. Some servicers advance funds to lenders on behalf of borrowers, and such advances were not provided deposit insurance coverage. Under the new rules, those advances will be insured up to $250,000 per mortgagor. The rule goes into effect on April 1, 2024.

“This NPRM builds on the experience that FinCEN has gained in administering existing pilot programs and once finalized, will assist financial institutions in further combating illicit finance risks.”
 – FinCEN Acting Director Himamauli Das

CFPB Updates Education Loan Examination Procedures in Preparation for Examining Post-Secondary Institution’s In-House Lending Practices

On January 20, in light of past abuses at schools involving high interest rates, strong-arm debt collection practices, kickback arrangements and steering, and due to the vulnerability of student borrowers to abuses by their school, the CFPB announced an update to its Education Loan Examination Procedures in preparation for beginning examinations of post-secondary schools that extend private loans directly to students.

The updated examination procedures address concerns about private loans extended directly to students or parents by post-secondary schools (e.g., for-profit colleges) to fund undergraduate, graduate, and other forms of post-secondary education (i.e., institutional loans). These concerns include: appropriate handling of fees, refunds, and account balances; prepayment penalties; use of payment plans or temporary credits; enrollment restrictions; withholding of transcripts or other forms of refusal to certify a student’s completion of a program; improper acceleration of payments; and maintaining improper lending relationships.

The CFPB intends the examination procedures to serve as a resource for those subject to CFPB examinations, informing them about practices that CFPB examiners will review.

SEC: No More Courtesy Copies Please

On January 21, the SEC announced that the Divisions of Corporation Finance and Investment Management Staff request that paper courtesy copies no longer be sent as a matter of course, unless requested by the Staff. Registrants typically send paper "courtesy copies" of materials that are filed or submitted via EDGAR, email, online form or other electronic method of communication. These courtesy copies no longer need to be submitted to the SEC.

SEC Proposes Securities Lending Transaction Reporting Requirements

On January 21, Goodwin published a client alert discussing the SEC’s previously proposed new Rule 10c-1, which, if adopted, would create a new reporting and disclosure framework for the securities lending market. The proposal represents the SEC’s response to its nearly 12 year old mandate under Section 984 of the Dodd-Frank Act to “increase the transparency of information available to brokers, dealers, and investors with respect to loan[ing] or borrowing securities.”

Read the client alert to learn more about the applicability and impact of the proposed new rule.

Guidelines on Marketing Communications Under the Regulation on Cross-Border Distribution of Funds

On January 25, Goodwin published a client alert discussing the European and Markets Authority’s (ESMA) previously published Guidelines on Marketing Communications (the Guidelines) under the regulation on cross-border distribution of funds, which applies new standards to marketing communications addressed to investors or potential investors.

Read the client alert to learn what is covered by the Guidelines.

Check Out Goodwin’s Latest Industry Insights

FinReg + Policy Watch Blog
Stay on top of developments affecting the financial services community.

LenderLaw Watch Blog
Stay on top of news and legal issues in the consumer finance industry.

Consumer Finance Enforcement Watch Blog
Stay on top of enforcement actions, trends and issues.

Digital Currency + Blockchain Perspectives Blog
Stay on top of digital currency industry news, regulatory developments and issues.

Nicole Griffin
Samantha Kirby
William McCurdy

Josh Burlingham
Serene Qandil
Sammy Tang