Cleary FinTech Update

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Latest from Cleary FinTech Update

OFAC Settles with Digital Currency Payment Processor for Sanctions Violations

By Derek M. Bush, Paul Marquardt, Alexis Collins, Chase D. Kaniecki, Patrick Fuller, Michael G. Sanders & Megan Lindgren

March 9, 2021

On February 18, 2021, the U.S. Department of the Treasury, Office of Foreign Assets Control (OFAC) announced a $507,375 settlement with BitPay, Inc. (BitPay), a payment processor for merchants accepting digital currency as payment for goods and services, for 2,102 apparent violations of multiple sanctions programs between 2013 and 2018.[1] The settlement highlights that financial service providers facilitating digital currency transactions must not only establish sanctions compliance programs to screen their own customers but…

Cleary FinTech Update

Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities

By Robin M. Bergen, Zachary Baum & Veronica Joubert

March 8, 2021

On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”). The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts under new SEC leadership. The 2021 Priorities include: retail investors; information security and operational resilience; financial technology (“Fintech”), including digital…

Cleary FinTech Update

FDIC Overhauls Brokered Deposit Regulation

By Cleary Gottlieb

January 27, 2021

In December 2020, the FDIC approved a Final Rule to reframe the definition and exceptions for “brokered deposits”. Historically, the FDIC has broadly defined virtually any third party connecting a depositor with a bank as a “deposit broker” and the resulting deposits as “brokered deposits”. The Final Rule responds to long-standing industry criticisms seeking to narrow these terms. The Final Rule aims to permit substantially more deposits to be excluded from treatment as “brokered deposits”…

Cleary FinTech Update

OCC Affirms Authority of National Banks to Engage in Additional Cryptocurrency-Related Activities, Including Issuing Stablecoins

By Derek M. Bush, Katherine Mooney Carroll, Graham Bannon, Michael G. Sanders & Hugh C. Conroy, Jr.

January 15, 2021

On January 4, 2020, the Office of the Comptroller of the Currency (“OCC”) published an interpretive letter (the “Letter”) clarifying that national banks and federal savings associations (“banks”) may engage in and facilitate payment activities through new technological means, including serving as a node in a distributed ledger system such as those utilized by some stablecoins, facilitating customer conversion of fiat currency to or from digital currencies, and issuing stablecoins. The Letter reasons that payment…

Cleary FinTech Update

SEC Issues Enforcement Action Against Unikrn, Inc. for its ICO, Prompting Rare Public Dissent from Commissioner Hester Peirce

By Alexis Collins, Colin D. Lloyd, Matthew C. Solomon, Zachary Baum & Jim Wintering

September 24, 2020

On September 15, 2020, the Securities and Exchange Commission issued a cease‑and‑desist order against Unikrn, Inc. concerning its 2017 initial coin offering of UnikoinGold . The SEC found that the Unikrn ICO violated the prohibition in Section 5 of the Securities Act of 1933 against the unregistered public offer or sale of securities. The SEC imposed several remedies, including requiring Unikrn to permanently disable the UnikoinGold token and a civil money penalty of $6.1 million.…

Cleary FinTech Update

AML Regulators Clarify Diligence Requirements for Politically Exposed Persons

By Katherine Mooney Carroll, Paul Marquardt, Patrick Fuller & Graham Bannon

August 31, 2020

On August 21, the Financial Crimes Enforcement Network, together with the federal banking agencies, released a statement to clarify banks’ customer due diligence obligations for politically exposed persons. The Statement affirms that (i) there is no regulatory requirement, and no supervisory expectation, for banks’ Bank Secrecy Act / anti-money laundering programs to include “unique, additional due diligence steps” for customers who are PEPs and (ii) there is no regulatory requirement for banks to screen customers and…

Cleary FinTech Update

OCC Imposes $80 Million Penalty in Connection with Bank Data Breach

By Katherine Mooney Carroll, Alexis Collins, Rahul Mukhi, Jonathan S. Kolodner & Hyatt Mustefa

August 18, 2020

In a landmark enforcement action related to a bank data breach, the Office of the Comptroller of the Currency (“OCC”) assessed an $80 million civil monetary penalty and entered into a cease and desist order with the bank subsidiaries of Capital One on August 6, 2020. The actions follow a 2019 cyber-attack against Capital One. The Federal Reserve Board also entered into a cease and desist order with the banks’ parent holding company. The OCC…

Cleary FinTech Update

OCC Interpretation Opens the Door for Banks to Enter the Crypto Custody Business

By Katherine Mooney Carroll, John Lightbourne & Graham Bannon

July 24, 2020

On July 22, 2020, the Office of the Comptroller of the Currency (“OCC”) published an interpretive letter clarifying that providing cryptocurrency custody services to customers is a permissible activity for national banks and federal savings associations. This letter marks an important milestone in the expansion of permissible banking activities related to digital assets.…

Cleary FinTech Update

Federal Court Compels Production of Data Breach Forensic Investigation Report

By Katherine Mooney Carroll, Alexis Collins, Rahul Mukhi, Jonathan S. Kolodner & Hyatt Mustefa

July 8, 2020

On June 25, 2020, a federal district court in the Eastern District of Virginia held that a bank must produce in discovery a report generated by its cybersecurity forensic investigator following a 2019 data breach involving unauthorized access to personal information of customers and individuals who had applied for accounts.[1] Even though the report was produced at the direction of outside counsel, the court rejected arguments that the forensic report is protected from disclosure…

Cleary FinTech Update

CFTC Issues Final Interpretive Guidance on Actual Delivery for Digital Assets

By Colin D. Lloyd & Jim Wintering

April 13, 2020

On March 24, the Commodity Futures Trading Commission (“CFTC”) released its Final Interpretive Guidance on Actual Delivery for Digital Assets (“Final Interpretation”), addressing longstanding questions regarding which digital asset transactions could be deemed “retail commodity transactions” under the Commodity Exchange Act (“CEA”). The Final Interpretation comes two years after the CFTC issued proposed interpretive guidance (“Proposed Interpretation”).…

Cleary FinTech Update

The Latest Insights Into Innovation in Financial Services

Blog Authors

OFAC Settles with Digital Currency Payment Processor for Sanctions Violations

Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities

FDIC Overhauls Brokered Deposit Regulation

OCC Affirms Authority of National Banks to Engage in Additional Cryptocurrency-Related Activities, Including Issuing Stablecoins

SEC Issues Enforcement Action Against Unikrn, Inc. for its ICO, Prompting Rare Public Dissent from Commissioner Hester Peirce

AML Regulators Clarify Diligence Requirements for Politically Exposed Persons

OCC Imposes $80 Million Penalty in Connection with Bank Data Breach

OCC Interpretation Opens the Door for Banks to Enter the Crypto Custody Business

Federal Court Compels Production of Data Breach Forensic Investigation Report

CFTC Issues Final Interpretive Guidance on Actual Delivery for Digital Assets

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