A big year for the BSA

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Dec 22, 2023 View in browser   By Zachary Warmbrodt Presented by PROGRAMMING NOTE: We’ll be off next week for the holidays but back to our normal schedule on Tuesday, Jan. 2. Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. QUICK FIX The Biden administration is days away from kicking off a sweeping crackdown on financial crime that will impact tens of millions of businesses. It may just be the beginning for a bipartisan group of lawmakers — agitated by separate concerns over cryptocurrency — who want to tighten anti-money laundering safeguards even further next year. It’s all coming together to make 2024 a critical moment for the Bank Secrecy Act, a 53-year-old law that’s morphed many times over the decades and is back at the top of the Washington policy debate. As you read this, the Treasury Department is gearing up to implement an historic set of rules, years in the making, that will require an estimated 32 million business entities to disclose their ownership details after Jan. 1. Congress enacted the policy in 2021 in a bid to clamp down on anonymous shell companies that have been used to evade taxes, facilitate money laundering and fund terrorism. Officials have had to balance concerns about privacy with demands for the data to be useful to law enforcement and banks that are supposed to act as the first line of defense against money laundering. Treasury’s Financial Crimes Enforcement Network initially faced criticism from transparency advocates and lenders that access to the data would be too restrictive. On Thursday, as the eve of the new reporting regime neared, FinCEN revised the access rules and said it would ease some of those limitations, particularly so banks could use the ownership information for a broader range of purposes to combat money laundering and comply with sanctions. The move, in turn, may have triggered a fresh backlash. House Financial Services Chair Patrick McHenry, who has vowed to make anti-money laundering rules a top oversight priority next year, said he remained concerned about “overly broad access and inadequate data security protections.” McHenry is calling on the administration to delay the reporting requirement’s Jan. 1 launch, in part because “millions of small business owners remain unaware of their beneficial ownership reporting obligations.” Dozens of other House and Senate Republicans have also called for a delay. Treasury is well aware of the daunting public awareness challenge before it. A FinCEN official told MM that one of the agency’s main priorities is educating business owners and that critical to that effort will be a “robust public outreach campaign.” The official acknowledged that many business owners have never heard of FinCEN. On Capitol Hill, a bipartisan group of lawmakers concerned about crypto’s use in terrorism and other financial crimes are pressing to further beef up FinCEN’s responsibilities in the coming year. Sens. Elizabeth Warren and Roger Marshall, with support from 18 other co-sponsors, have legislation that would extend BSA obligations to digital asset wallet providers, miners and other crypto entities. Warren argues her bill is in line with a recent call by Treasury to expand anti-money laundering rules in the crypto space. Sens. Mark Warner, Jack Reed, Mike Rounds and Mitt Romney have a separate pair of bills to tackle money laundering concerns in decentralized finance and to expand the reach of financial sanctions. “Recent events — from Ukraine to the Middle East — make clear that the bad guys never sleep,” Warner told MM. The crypto industry is gearing up to fight back against proposals — especially Warren’s — that it says are overly broad and threaten the viability of the U.S. digital asset sector. Some advocates are laying the groundwork for a potential legal challenge against the BSA itself. The Coin Center think tank has produced analyses outlining potential constitutional weaknesses of the BSA. Coin Center research director Peter Van Valkenburgh told MM that the group is happy so far with the limited approach to digital assets taken by FinCEN, the agency tasked with enforcing the BSA. It has spared bitcoin miners, the users of self-hosted wallets and software developers from BSA reporting requirements. “If FinCEN changed policy, which they haven’t yet, or if main Treasury overruled FinCEN — if they were a bit more hostile to the technology — we would then challenge that directly,” he said You made it — Happy Friday. Thank you so much for reading MM this year. The newsletter will return Jan. 2. Until then, keep sending tips to zwarmbrodt@politico.com. A message from NRF Foundation: Retail is a great place to start – and a great place to grow a career. The retail industry is the nation’s largest private-sector employer, supporting one in four U.S. jobs – 52 million working Americans. 32% of Americans’ first jobs were in retail, and more than 60% have worked in retail at some point in their careers. Learn more about how we help people get a first chance or a fresh start in retail.   Driving the day November PCE is out at 8:30 a.m. Biden wants ‘serious scrutiny’ of U.S. Steel takeover — In a major economic policy move, the White House is signaling that it supports a national security review of Nippon Steel’s acquisition of U.S. Steel — a process that could end up with the deal being blocked. Per our Doug Palmer, White House NEC Director Lael Brainard said Biden welcomes manufacturers “across the world” operating in the U.S. with American workers. But Biden also believes the purchase of the “iconic” U.S. Steel by a foreign entity — even one headquartered with a close ally like Japan — “appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability.” A bipartisan group of lawmakers is calling on the administration to initiate an interagency CFIUS review and halt the $14 billion sale, which the United Steelworkers union also opposes. Scoop: CFTC official, Warren alum in mix for Treasury post — Daniel Lippman and your MM host report that the Biden administration is considering CFTC Commissioner Christy Goldsmith Romero and OMB official Julie Siegel for a Treasury Department role focused on banking and insurance, according to two people familiar with the process. The position, Treasury’s assistant secretary for financial institutions, is opening up following the departure of Graham Steele. Before joining the CFTC last year, Goldsmith Romero served as special inspector general for TARP, acting as the government watchdog for the bank bailout. Siegel was previously Treasury deputy chief of staff and a banking and economic policy aide to Sen. Elizabeth Warren.   A message from NRF Foundation:   Economy Why today’s inflation report matters — Per Bloomberg, this morning’s release of November PCE may help cement the case for lower interest rates in the coming quarters, following a series of encouraging data points on prices. Revised third-quarter GDP numbers released Thursday showed core PCE — the Fed’s preferred inflation gauge — increased at 2 percent, the slowest rate since the end of 2020. Fed banks rethink transparency — Jasper Goodman reports that the Fed’s 12 regional banks adopted a standardized transparency policy outlining their process for turning over records to the public. The banks, which are not subject to the Freedom of Information Act, have each had separate practices for disclosures. On the Hill Lawmakers will try to stop SEC cyber rule — Per Declan Harty, Sen. Thom Tillis is poised to get a vote on his resolution to block a new SEC cybersecurity disclosure rule that’s facing industry opposition. Tillis's team expects the Congressional Review Act petition to be considered on the Senate floor "very soon" after Congress returns in January. Regulatory Corner DOT investigates frequent flyer programs — In a new twist in the lobbying battle over credit cards, Reuters reports that the Transportation Department is scrutinizing the frequent flyer programs of major U.S. airlines for potential deceptive or unfair practices. Travel rewards have become a major topic of debate as the banking industry — backed by airlines — fights a push by retailers to pass bipartisan legislation that would try to restrict credit card fees. Sens. Dick Durbin and Roger Marshall, the lead lawmakers on the bill, asked DOT and the CFPB to scrutinize frequent flyer programs in October. A message from NRF Foundation: Retail careers are life-changing careers. As the nation’s largest private-sector employer, the retail industry supports one in four U.S. jobs – 52 million working Americans. 32% of Americans’ first jobs were in retail, and more than 60% have worked in retail at some point in their careers. With only 2-5 years of experience in the industry, earnings increase 54%. Those who stay in retail for more than 5 years can expect a staggering 122% increase in compensation. Retail careers also enable faster role advancement, with upward role advancements occurring every 14.5 months. To learn more about how we help people get a first chance or a fresh start in retail, visit nrffoundation.org.     Follow us on Twitter Mark McQuillan @mcqdc Zachary Warmbrodt @Zachary Victoria Guida @vtg2 Declan Harty @ @declanharty Eleanor Mueller @eleanor_mueller Katy O'Donnell @katyodonnell_ Sam Sutton @samjsutton   Follow us

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