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IG Report Concludes that IRS Lacks Compliance Strategy For Virtual Currencies
On November 8, the Treasury Inspector General for Tax Administration (TIGTA) released a report evaluating the IRS’s strategy for addressing income produced via virtual currencies. The report which was completed on Sept. 21, but released Tuesday, observed that none of the agency’s divisions have yet developed any type of compliance initiatives or guidelines for conducting examinations or investigations specific to tax noncompliance related to virtual currencies. Accordingly, the TIGTA recommended that the IRS develop a comprehensive strategy for virtual currencies such as Bitcoin to help ensure compliance with tax law. The report also recommended that the IRS provide updated guidance to reflect the necessary documentation requirements and tax treatments necessary for the various uses of virtual currency and that the agency revise third-party reporting documents so that they identify how much virtual currency was used in taxable transactions. The IRS agreed with each of these three recommendations.
Financial Stability Oversight Council will hold its first post-election meetings on November 16
On November 16, Treasury Secretary Jack Lew will preside over a meeting of the Financial Stability Oversight Council (FSOC). The agenda will include both an open and an executive session. The preliminary agenda for the open session includes an update on the work of the Alternative Reference Rates Committee, an update on the council's review of the asset management industry and revisions to the council's regulations under the Freedom of Information Act. The preliminary agenda for the executive session includes a presentation on stress tests of central counterparties conducted by the CFTC, a discussion of confidential data related to the Council’s review of asset management products and activities, and an update on the annual re-evaluation of the designation of a non-bank financial company.
Open session Council meetings are made available to the public via live webcast and also can be viewed after they occur here. Meeting minutes for the most recent Council meeting are generally approved at the next Council meeting and posted online soon afterwards. Meeting minutes for past Council meetings are available here. Readouts for past Council meetings are available here.
OFAC Authorizes Belarus-Related General License
On October 18, OFAC granted General License No. 2B renewing the authorization regarding nine Belarusian entities to enter into transactions otherwise prohibited by Executive Order 13405. General License No. 2B replaces and supersedes in its entirety General License No. 2A, which was set to expire later this month, and authorizes transactions with any entities that are owned 50 percent or more by the nine named entities. All property and interests in property of these entities, if blocked, remain blocked. U.S. persons must report authorized transactions or any series of transactions exceeding $50,000 to the U.S. Department of State no later than 30 days after execution. The authorization expires on April 30, 2017, unless otherwise extended or revoked.
Treasury and Federal Reserve Support G-7 Elements of Cybersecurity for the Financial Sector
On October 11, the U.S. Department of the Treasury announced that the Group of Seven (G-7) countries – comprised of the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom – issued fundamental elements to “help address cyber risks facing the financial sector from both entity-specific and system-wide perspectives.” In Fundamental Elements of Cybersecurity for the Financial Sector, G-7 outlines eight elements for private and public entities within the financial sector to use as “building blocks” for confronting cyber-related issues, the first of which is to establish and implement tailored cybersecurity strategies and operational frameworks that should be tailored to an entity’s nature, size, complexity, risk profile, and culture. G-7’s remaining seven elements are as follows: (i) define and facilitate effective governance structures to ensure accountability; (ii) identify cyber risks and implement control assessments, including systems, policies, procedures, and training; (iii) “establish systematic monitoring processes to rapidly detect cyber incidents and periodically evaluate the effectiveness of identified controls, including through network monitoring, testing, audits, and exercises”; (iv) ensure that incident response policies are effective and guarantee timeliness; (v) establish and test contingency plans that help to ensure effective recovery of critical functions and operations; (vi) share cybersecurity information with internal and external stakeholders, including threat indicators, vulnerabilities, and incidents; and (vii) develop a review process that addresses, among other things, evolving cyber risks. In support of the G-7 elements, Federal Reserve Vice Chairman Stanley Fischer stated that they are “a crucial step in furthering hardening each link in the chain of our global financial system.”
Special Alert: OCC to Issue Guidance on "De-Risking" in Foreign Correspondent Banking Relationships
On September 28, 2016 OCC Comptroller Thomas J. Curry announced during a speech at the Association of Certified Anti-Money Laundering Specialists (ACAMS) conference that the OCC is developing guidance around “de-risking” in foreign correspondent banking relationships. Following the joint fact sheet published by the federal banking agencies and the Department of Treasury, Comptroller Curry said that it will issue “guidance that reiterates our risk management expectations for banks to establish and follow policies and procedures for regularly conducting risk evaluations of their foreign correspondent portfolios.” The guidance will describe “best practices” that the OCC has observed that banks can use when “re-evaluating their risks and making decisions about retaining or terminating foreign correspondent accounts.”
Click here to view the full Special Alert
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Questions regarding the matters discussed in this Alert may be directed to any of our lawyers listed below, or to any other BuckleySandler attorney with whom you have consulted in the past.
- James T. Parkinson, (202) 349-7955
- Benjamin Hutten, (212) 600-2333
House Passes Bill to Bring Transparency to Iranian Finances
On September 21, the House of Representatives voted to pass the Iranian Leadership Asset Transparency Act. This bill, HR 5461, would require the Treasury Secretary to publish a list of assets held by senior Iranian political and military leaders, including where the assets were acquired, and how they are employed. The Treasury would also be required to identify new methods used to evade anti-money laundering laws and provide recommendations to improve techniques to combat illicit uses of the U.S. financial system by each official. The required report would be posted on the Treasury Department’s website in English, but also in the three major languages spoken within Iran.
CFPB Issues Principles for the Future of Loss Mitigation
On August 2, the CFPB released consumer protection principles for mortgage servicers to use as they develop new foreclosure relief solutions in anticipation of Treasury’s Home Affordable Modification Program’s (HAMP) upcoming expiration date (CFPB Principles). The CFPB Principles echo those summarized in FHFA’s, HUD’s, and Treasury’s recently published white paper, “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” As previously covered in InfoBytes, the white paper recommends that future loss mitigation programs promote accessibility, affordability, sustainability, transparency, and accountability. The CFPB Principles address accessibility, affordability, sustainability, and transparency, and cite to separate CFPB mortgage servicing rules for standards concerning accountability. In its press release, the CFPB notes that the four principles “do not establish binding legal requirements but instead are intended to complement ongoing discussions among industry, consumer, groups, and policymakers.”
Agencies Issue White Paper Regarding Loss Mitigation Programs
On July 25, FHFA, HUD, and Treasury published a white paper titled “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” The paper examines the effect of the 2008 financial crisis on the mortgage servicing industry with a focus on loss mitigation programs. Under the 2009 Making Home Affordable (MHA) program, foreclosure alternatives were established to address the needs of homeowners and to improve the mortgage servicing industry’s loss mitigation practices. According to the paper, between April 2009 and the end of May 2016, 10.5 million modification and mortgage assistance arrangements were completed through government programs and private sector efforts. The paper further notes that, as a result of FHFA’s, HUD’s, and Treasury’s programs, regulatory actions, and private sector initiatives, the mortgage industry is “generally better prepared now to provide assistance to struggling homeowners than it was before the crisis.” The improvement “is due, in part, to the adoption of certain homeowner engagement standards including continuity of contact, solicitation timeframes, and certain notice and appeal processes required by the [CFPB].” At the end of 2016, MHA programs, such as HAMP, will come to a close. Based on the agencies’ collective experience with MHA programs, the paper identifies five guiding principles for loss mitigation programs: (i) accessibility, guaranteeing homeowners a simple process for obtaining mortgage assistance; (ii) affordability, “providing homeowners with meaningful payment relief that addresses the needs of the homeowner, the servicer and the investor, to support long-term performance”; (iii) sustainability, offering long-term solutions intended to resolve delinquency; (iv) transparency, “[e]nsuring that the process to obtain assistance, and the terms of that assistance, are as clear and understandable as possible to homeowners, and that information about options and their utilization is available to the appropriate parties”; and (v) accountability, ensuring sufficient oversight of the process to obtain mortgage assistance.
Department of Education Outlines New Protections for Student Loan Borrowers
On July 20, Under Secretary Ted Mitchell of the U.S. Department of Education sent a memo to the Federal Student Aid Chief Operating Officer containing policy directives intended to “strengthen student loan servicing.” Developed in consultation with the CFPB and the Department of the Treasury, the memo provides direction in the following five areas: (i) economic incentives, directing the FSA to use “incentives that encourage servicers to help borrowers stay on top of their loans and avoid default while avoiding fixed-fee structures that create a disincentive to help struggling borrowers”; (ii) accurate and actionable information about account features, borrower protections, and loan terms; (iii) consistency in communications; (iv) accountability, directing the FSA to “step up monitoring of servicing vendors and to integrate complaint resolution into the oversight of those vendors”; and (v) loan data transparency. Commenting on the policy directives outlined in the memo, CFPB Director Richard Cordray noted that the joint servicing standards are intended to increase consistency, transparency, actionability, and accountability in the student lending marketplace.
Treasury Adopts Methodology for Monitoring the Affordability of Auto Insurance
On July 13, the Treasury Department announced that the Federal Insurance Office (FIO) adopted a methodology for monitoring the affordability of auto insurance. Under the Dodd-Frank Act, the FIO is authorized to monitor the extent to which affordable personal automobile insurance is made available to traditionally underserved communities and consumers, minorities, and low- and moderate-income (LMI) persons. Pursuant to the new methodology, FIO will calculate affordability by using an affordability index that divides the average annual personal automobile liability premium by the median household income for identified majority-minority or majority-LMI ZIP codes. If the Affordability Index does not exceed to 2%, then FIO will consider personal automobile liability insurance affordable. Finally, to monitor the availability of auto insurance, FIO will obtain and analyze aggregated premium data in addition to using publicly available data through the U.S. Census Bureau.