The Morning Risk Report: Proposed FinCEN AML Rules Wonâ€™t be Very Onerous

The Morning Risk Report: Proposed FinCEN AML Rules Won't be Very Onerous

By Ben DiPietro

Proposed rules from the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) that would require banks lacking a federal regulator to establish an anti-money laundering compliance program won't be too cumbersome to enact for the financial institutions that will be affected by them, said a former federal banking regulator. The proposal—which FinCEN says will affect around 740 banks across the country, mostly private banks but also certain trusts and credit unions--would require these unregulated entities to have essentially the same compliance programs as regulated financial institutions.

The proposed rules would require these institutions to have a customer identification procedure, a basic anti-money laundering program and subjects them to the new customer due diligence and beneficial ownership rule, said Alma Angotti, a managing director at management consulting firm Navigant Consulting Inc. who previously worked at FinCEN, the U.S. Securities and Exchange Commission and the Financial Industry Regulatory Authority. Since most of the entities that would be covered by this proposed rule already have AML programs, they shouldn't have many issues with these changes, she said. Most of these banks probably are in compliance with these rules anyway as part of their best practices and many states that regulate these institutions have rules that tie in to the federal regulations, said Ms. Angotti. "I don't think it will be very burdensome," she said. "They already are subject to other parts of the Bank Secrecy Act, such as bookkeeping and records, and they've had to file suspicious activity reports. I don't see this as a huge big deal."

As for the customers of these financial institutions, Ms. Angotti said they should be prepared to share more information. "I don't know that customers will notice all that much. Customers will probably have to give them more information when they open an account but the customer won't necessarily feel the brunt of it," she said. "They're going to have to say 'I have this family business, an LLC [limited liability corporation] but there is this person who owns 25% of it.' "

CFO Sentiment on Brexit: Global CFO Signals

Results of surveys of CFOs in nine geographies provide insight into their sentiment on U.K.’s Brexit vote on June 23 and its aftermath, revenue expectations, risk appetite, hiring and other issues, as discussed in the most recent Global CFO Signals report from Deloitte Touche Tohmatsu Limited. Judging from the results, the impact of the Brexit vote depends on respondents’ perspective and their exposure. Going forward, Brexit’s impacts may be contained and slow to evolve. Meanwhile, many CFOs are identifying potential risk exposures and considering strategies for doing business in the U.K. and the EU. Continue »

EXCLUSIVE ON R&C JOURNAL

Blind spots on the Internet of Things. A survey by digital security and compliance services firm Tripwire found 30% said their organizations are prepared for the security risks associated with internet of things (IoT) devices, while 34% said they believe their organizations accurately track the number of IoT devices on their networks.

COMPLIANCE

HP, HP Enterprise accused of age discrimination. Four former employees of Hewlett-Packard Co. have filed a lawsuit alleging they were victims of age discrimination as the technology giant pared its workforce in recent years, WSJ reports. Their suit, filed Aug. 18 in the U.S. District Court in San Jose, Calif., alleges violations of California and federal laws and seeks class-action status on behalf of other workers who were 40 years old or older at the time they were laid off.

Associated Press

Lotte probe exposes flaws in Korea Inc. Loyalty has been a driving force in the success of South Korea's family-run "chaebol" conglomerates, but it can also shield the failings of its corporate culture and it was linked to tragedy at the Lotte Group, the subject of a sweeping criminal probe, Reuters reports. Hours before group vice chairman Lee In-won was to be questioned by prosecutors, he was found dead in an apparent suicide, leaving a note hailing his boss as a "great man" and denying the company operated a slush fund, reportedly one of a list of prosecutors' suspicions that includes embezzlement, tax evasion and breach of trust.

Short-seller says Herbalife misled investors on the effects of an FTC settlement. After U.S. multi-level marketing company Herbalife settled a probe of its sales practices with the U.S. Federal Trade Commission last month, top executives assured investors that the company would be able to thrive under the new rules. In its July 15 ‎settlement, Herbalife agreed to restructure its U.S. business so distributors are rewarded for sales rather than for recruitment of sales agents and it agreed to pay a $200 million fine. But Herbalife's filings with the U.S. Securities and Exchange Commission painted a much less optimistic picture than its presentation to analysts and investors, Reuters reports, citing a private investor who flagged the differences to the SEC this month. FT reports that Carl Icahn attacked his rival over comments made about Herbalife.

U.S. proposes device to force truckers to lower speeds. The U.S. is seeking to forcibly limit how fast trucks, buses and other large vehicles can travel on the nation's highways, AP reports.

Business-drone rules take effect. The first detailed U.S. rules for flights of small commercial drones go into effect Monday, WSJ reports, including nationwide licensing requirements for pilots and a ban on nighttime operations. Thousands lined up for the licenses, Bloomberg reports.

FAA tightens safeguards of lithium batteries on airplanes. Three years after fire-prone lithium batteries led to the temporary grounding of Boeing Co.'s flagship 787 fleet world-wide, U.S. regulators are ratcheting up safety standards, as they approve use of various types of lithium power cells on different airliners and business aircraft, WSJ reports.

India's Bank of Baroda defends central-bank crackdown. The chief executive of India's second-largest state-owned bank has defended a central bank crackdown on distressed assets that critics say has chilled loan growth, arguing it has helped stop the troubled public-sector lenders from lending to clients "who will get into trouble," FT reports.

DATA SECURITY

Banks are starved for data amid rise of third-party payment apps. The rise of third-party mobile payments in China at the expense of credit and debit cards is threatening commercial banks' access to the customer data viewed as crucial to newly emerging financial and consumer business models, FT reports. Chinese banks also set to lose amid a national industrial restructuring, FT reports.

Hedge fund claims pacemaker is vulnerable to hackers. Muddy Waters, the hedge fund, claimed that a pacemaker manufacturer's life-saving devices are vulnerable to hackers, the first time a shortseller has publicly used alleged cyber security vulnerabilities to put pressure on a stock to fall, FT reports.

GOVERNANCE

Shari Redstone takes reins at Viacom. Shari Redstone has taken control at Viacom Inc. after vanquishing challengers. Now comes the hard part: deciding what to do with all that power, Bloomberg reports.

Getty Images

Big investment groups flex muscles in the boardroom. Some of the world's biggest investment groups, pension funds and charitable foundations have joined forces in a landmark initiative to improve company performance, curb excessive pay and improve boardroom quality, FT reports.

Apple CEO sells block of compensation stock. Apple Inc. Chief Executive Tim Cook reaped the biggest chunk so far of the mega-stock grant he received when was named CEO in 2011, WSJ reports.

P&G CEO gets $2.5 million bonus. A Procter & Gamble Co. incentive program with some unconventional measures meant extra cash for top executives after a year in which the company missed sales and profit growth targets, WSJ reports. David Taylor, chief executive since November, was awarded a $2.5 million bonus for the fiscal year ended June 30, according to a proxy statement filed Friday. He received total compensation of $14.4 million for the year.

Activist investor hails ouster of Stada chairman. Activist investor AOC hailed the ousting of German generic drugmaker Stada's chairman at a stormy annual meeting on Friday as a "victory for shareholder democracy in Germany," FT reports.

REPUTATION

Goldman, Morgan Stanley reinvent themselves. In the darkest days of the financial crisis, Goldman Sachs Group Inc. and Morgan Stanley became bank-holding companies to shore up confidence and gain the implicit backing of the Federal Reserve. But few believed the Wall Street powerhouses would fundamentally change—that they would don the banking cloak until their trading and investment-banking businesses came roaring back, WSJ reports.

Mylan to launch generic EpiPen. Mylan NV said it would launch the first generic to its allergy auto-injector EpiPen at a discount of more than 50 percent to the branded product's list price, Reuters reports.

RISK

Frozen orange-juice market disappears. The once-thriving market for frozen orange-juice concentrate is getting squeezed, WSJ reports. Traders have been dropping out for years because of waning consumer demand for juice and a rampant disease that has producers abandoning groves. Now, entering hurricane season, those who remain must confront the possibility that a storm could wreak havoc on what is left of Florida's orange crop, already on track for the smallest harvest in 52 years.

OPERATIONS

Prepaid card relaunches after glitch. Nearly a year after a technical glitch prevented its customers from getting access to their money, prepaid debit-card provider RushCard is rolling out new features that usually aren't available to low-income consumers, WSJ reports.

LATEST NEWS

UNSUBSCRIBE NEWSLETTERS & ALERTS CONTACT US PRIVACY POLICY COOKIE POLICY

You are currently subscribed as jasajuejejeje@gmail.com

For further assistance, please contact Customer Service at support@wsj.com