Why Jan. 6 looms over banking

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Apr 04, 2024 View in browser   By Jasper Goodman Presented by  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 House conservatives’ probe into the “weaponization” of the government is triggering a rethink of banking system safeguards on the right. An investigation into federal law enforcement’s interactions with banks following the Jan. 6, 2021, attack on the Capitol is raising privacy concerns among Republicans over federal anti-money laundering rules. Rep. Jim Jordan, an Ohio lawmaker closely aligned with former President Donald Trump, is leading the effort. Those concerns could move to the forefront if the Republicans take power in 2025. It’s an issue to watch as Trump, who has defended the Jan. 6 rioters as “hostages,” stages a comeback and populist Republicans seek greater influence over policymaking. The focus is the 54-year-old Bank Secrecy Act, which requires financial institutions to flag to the government any customer activity that they deem suspicious. After Jan. 6, the Treasury Department’s Financial Crimes Enforcement Network, which enforces anti-money laundering rules, offered financial institutions potential methods for identifying suspicious transactions, according to documents released by House Judiciary. They included using search terms that have drawn the ire of GOP lawmakers, such as “Trump”, “Biden” and “Kamala.” In a February letter responding to concerns that Sen. Tim Scott (R-S.C.) raised about the issue, a Treasury official wrote that the Jan. 6 communications came as part of a voluntary “FinCEN Exchange” convened following the Capitol attack. “As part of these Exchange events, which began shortly after January 6 under the prior Administration, FinCEN and banks shared information about methodologies that banks could consider using as part of their AML/CFT programs to identify indicia of suspicious activity,” the official, Corey Tellez, wrote. The exchanges focused on Jan. 6 ended in February 2021, according to the letter, which was obtained by MM. The investigation has caused headaches for the banking industry. Bank of America and Citigroup have both received subpoenas from the committee. Some Republicans are calling for changes to the BSA that would require FinCEN and other law enforcement entities to obtain warrants to access customers’ financial data. “The government is essentially warrantlessly surveilling the American people,” said Rep. John Rose (R-Tenn.), who has introduced legislation that would repeal the section of the BSA that requires financial institutions to turn over suspicious financial information without a warrant. “I think if the American people knew the extent to which their private information was being shared already, they would be horrified.” Rose’s legislation, first introduced in 2022, has gotten little traction in the House Financial Services Committee, which has jurisdiction over banking regulations. But Jan. 6 has “brought a lot of attention to a problem that was really hard to get attention to,” said Norbert Michel, vice president of the Cato Institute’s Center for Monetary and Financial Alternatives. Treasury says suspicious activity reporting is key to its anti-money laundering efforts. In the February letter to Scott, the FinCEN official wrote that suspicious activity reports “constitute critical tip-and-lead information that helps law enforcement identify, stop, and apprehend criminal actors.” It’s an issue that could spark tension between hard-right lawmakers concerned about privacy and traditional GOP law enforcement hawks wary of stripping away authority used to stop money laundering. “If you roll back the BSA, it would be an open invitation for all these criminal groups to come here and launder money,” said Daniel Stipano, a former longtime banking regulator at the Office of the Comptroller of the Currency who is now a partner at the law firm Davis Polk. Happy Thursday — Send tips to zwarmbrodt@politico.com.   A message from Electronic Payments Coalition: CRS: NO EVIDENCE THAT DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP CONSUMERS OR SMALL BUSINESSES The independent Congressional Research Service (CRS) is the latest organization to release a report questioning whether the Durbin-Marshall Credit Card Bill would help consumers or small businesses. CRS echoed an earlier report by the Richmond Fed noting that consumers failed to see any meaningful cost savings because of similar legislation imposing routing mandates and price caps on debit card interchange. Learn more HERE.   Driving the day FDIC Chair Martin Gruenberg and Acting Comptroller of the Currency Michael Hsu speak in the morning at the NCRC conference, which begins at 7:30 a.m. … Richmond Fed President Tom Barkin discusses the economic outlook at the Home Building Association of Richmond at 12:15 p.m. … CFPB Director Rohit Chopra speaks at the International Association of Privacy Professionals summit in Washington at 1:30 p.m. … Representatives from the IMF, BlackRock and Moody’s Ratings discuss the growth of private credit at Brookings at 1:30 p.m. … Treasury Under Secretary Brian Nelson gives keynote remarks at a Georgetown illicit finance event at 5 p.m. … Fed Gov. Ariana Kugler gives keynote remarks at the St. Louis Fed’s women in economics symposium at 7:30 p.m. Powell on election politics — Federal Reserve Chair Jerome Powell on Wednesday gave an unusually direct acknowledgment of the political backdrop that central bank officials are facing this year. Our Victoria Guida reports that Powell defended the central bank’s dedication to setting policy in the long-term interest of the economy as the Fed weighs whether to cut interest rates in an election year. “Fed policymakers serve long terms that are not synchronized with election cycles,” Powell said in a speech at Stanford Graduate School of Business. “Our decisions are not subject to reversal by other parts of the government, other than through legislation. This independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters.” America’s housing crisis — Victoria is out with her latest “Capital Letter” column, which tackles an issue that’s vexing nearly every governor in America: the housing shortage. She writes: “Across the country, there are states and municipalities tackling the same pervasive but tedious problem: overly restrictive zoning that makes it challenging or nearly impossible to build new housing.” “Opposition to reform is often fierce, from environmental concerns to anxiety from homeowners that more supply will lead their property values to drop. But the fear and anger at rising rents and unattainable homeownership has finally gotten policymakers’ attention. They need to do much more.” Brown, Scott talking on housing — A scoop from our Eleanor Mueller: “Senate Banking Chair Sherrod Brown (D-Ohio) and ranking member Tim Scott (R-S.C.) have entered a new phase of their efforts to legislate on housing, three Senate aides said Wednesday. “Their staffs recently held preliminary talks on a compromise package that the committee could mark up later this year, said the aides, who were granted anonymity to discuss closed-door conversations. They're also soliciting feedback from agencies on the housing bills that might be included, two of the aides said, and are planning a hearing with housing regulators for April 18, according to a fourth aide.”   A message from Electronic Payments Coalition:   On the Hill First in MM: Scott leads Senate Republicans in probing Iran sanctions waiver — Senate Banking Committee ranking member Sen. Tim Scott (R-S.C.) is requesting more information from the Treasury and State departments on the most recent extension of a sanctions waiver that allows Iran to sell electricity to Iraq and transfer some of the profits to accounts in Oman, Eleanor reports. "The United States should be restricting Iran’s access to currency abroad. Instead, your administration is expanding it," Scott wrote in a Wednesday letter signed by a dozen other Senate Republicans, including committee members Sens. Mike Crapo (R-Idaho), Katie Britt (R-Ala.) and Kevin Cramer (R-N.D.). Scott led a similar effort the last time the waiver was extended in November. Biden administration officials have testified that the waiver is necessary to protect stability in the region and that they ensure Iran uses the accounts in Oman only for humanitarian purchases like food. "Iran has used the build-up of these funds within Iraq to apply political pressure on Iraq," Treasury Under Secretary for Terrorism and Financial Intelligence Brian Nelson told House Financial Services in February. He added that "Iran's not getting access to the funds; these are in restricted accounts."   SUBSCRIBE TO GLOBAL PLAYBOOK: Don’t miss out on POLITICO’s Global Playbook, the newsletter taking you inside pivotal discussions at the most influential gatherings in the world, including WEF in Davos, Milken Global in Beverly Hills, to UNGA in NYC and many more. Suzanne Lynch delivers the world's elite and influential moments directly to you. Stay in the global loop. SUBSCRIBE NOW.     Wall Street JPM will let advertisers use spending data — The WSJ reports that JPMorgan Chase is launching a new digital media business that will let retailers target the bank’s customers based on their spending data. Crypto BIS to test tokenization — Bloomberg reports that the Bank for International Settlements and seven central banks — including the New York Fed — will explore how tokenization can improve the global financial system. The SEC’s crypto warning — From our Declan Harty: “SEC Enforcement Director Gurbir Grewal rebuked the cryptocurrency industry on Wednesday for what he said was its attempt to subvert the Wall Street regulator's authority, adding that the courts have "serially rejected" their arguments.”   A message from Electronic Payments Coalition: CRS QUESTIONS WHETHER DURBIN-MARSHALL CREDIT CARD BILL WOULD HELP ANYONE AT ALL Every member of Congress should read the CRS analysis which discusses the impact the Durbin-Marshall Credit Card Bill could have on small businesses and American families. Report after report has plainly demonstrated that consumers and small businesses did NOT save any money when Congress passed the 2010 Durbin Amendment, imposing new mandates on debit cards. Now, a decade later, why would anyone assume a monumental restructuring of our nation’s secure, worry-free credit card system would yield different results? After considering the facts, the only logical solution would be to strongly OPPOSE the Durbin-Marshall Credit Card Bill. Click HERE to learn more.   Fly Around Washington’s neoliberal consensus — Roll Call jointly profiles progressive Matt Stoller and conservative Oren Cass as “unlikely allies on a lot of things.” People moves — Afsaneh Beschloss, the CEO of the investment firm RockCreek, will join the board of the Carlyle Group in May, the firm announced Wednesday.   Access New York bill updates and Congressional activity in areas that matter to you, and use our exclusive insights to see what’s on the Albany agenda. Learn more.       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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