Financial Institutions and Congressional Investigations – 2020 into 2021

by Robert Kelner, Brian Smith, Angelle Baugh, and Brendan Parets

Financial institutions are consistently targets of congressional oversight interest. In the last Congress, House and Senate committees held hearings with, demanded documents from, requested interviews with, and hosted briefings from a number of bank and non-bank financial institutions regarding a variety of issues. In this post, we look at the recent trends in congressional investigations of financial services companies and predict the future trajectory of investigations related to this industry. 

Even as we write this post, Congress is pursuing investigations and hearings related to the stock trading controversy concerning GameStop, Reddit, and Robinhood. These inquiries fit with recent trends in congressional investigations of the financial service sector, such as the focus on financial companies of all sizes and concerns about consumer harm.

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Three Key Takeaways from the DOJ Fraud Section’s 2020 Annual Report

by Andrew Weissmann and Tali R. Leinwand

Last week, the Fraud Section, part of the U.S. Department of Justice’s (DOJ’s) Criminal Division, released its annual year-in-review report.[1] In this post, we highlight three key takeaways from the 2020 report.

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Will Virginia Be the Next Domino to Fall in State Privacy Law?

by Nathan D. Taylor and Robert N. Famigletti

As the Virginia Consumer Data Protection Act (H.B. 2307) heads to Governor Northam’s desk, it appears increasingly likely that Virginia will become the second state to enact a comprehensive consumer privacy law.

After overwhelmingly passing slightly different versions of the bill in late January and early February 2021, Virginia’s House of Delegates and Senate reconciled and passed a substitute, H.B. 2307, on February 19, 2021.  This comes just three months after California voters dramatically changed the California privacy law landscape by approving the California Privacy Rights Act (CPRA), a set of numerous amendments to the California Consumer Privacy Act (CCPA) that will become operative on January 1, 2023.  If enacted, H.B. 2307 will impose additional compliance obligations beyond the CCPA, even as amended by the CPRA.  Moreover, Virginia’s passage of comprehensive privacy legislation may encourage other state legislatures to follow suit—all likely renewing the call for a federal consumer privacy law.

This post provides an overview of the Virginia bill, with a focus on the areas in which it departs from the CCPA and/or CPRA.  Like the CPRA’s substantive obligations, H.B. 2307, if enacted, would become operative on January 1, 2023.

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2021 AML Trends and Developments (Part III of III)

by Franca Harris Gutierrez, Boyd Johnson, Bruce Newman, Michael Dawson, Zachary Goldman, Rachel Dober, Michael Romais, Alina Lindblom, and Andrew Miller

This is Part III of a three-part post. For Part II, discussing SAR reform, click here. For Part I, discussing the collection of beneficial ownership information, click here.

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Sen. Klobuchar Introduces Bill to Significantly Alter Federal Antitrust Law

by Craig A. Benson, Joseph J. Bial, Andrew C. Finch, Andrew J. Forman, William B. Michael, Jane B. O’Brien, Jacqueline P. Rubin, Charles F. (Rick) Rule, Aidan Synnott, Brette Tannenbaum

On February 4, 2021, Sen. Amy Klobuchar (D-MN) introduced the Competition and Antitrust Law Enforcement Reform Act (the “CALERA”), which is co-sponsored by Sens. Blumenthal (D-CT), Booker (D-NJ), Markey (D-MA) and Schatz (D-HI). If enacted, the CALERA would significantly alter existing federal antitrust law by, among other things, establishing new legal standards for anticompetitive mergers and expanding liability for exclusionary conduct. Continue reading →

2021 AML Trends and Developments (Part II of III)

by Franca Harris Gutierrez, Boyd Johnson, Bruce Newman, Michael Dawson, Zachary Goldman, Rachel Dober, Michael Romais, Alina Lindblom, and Andrew Miller

This is Part II of a three-part post. For Part I, discussing the collection of beneficial ownership information, click here.

Innovation and SAR Reform

Over the past few years, FinCEN and federal banking agencies have expressed general support for more effective, efficient, and innovative AML compliance programs, and both the letter and spirit of the NDAA represent another step in that direction.[1] Recent statutory and regulatory efforts have paved the way for concrete shifts in the compliance regime. In December, the Federal Deposit Insurance Corporation (“FDIC”) and Office of the Comptroller of the Currency (“OCC”) finalized parallel Notices of Proposed Rulemaking (“NPRMs”) entitled Exemptions to Suspicious Activity Report Requirements. The regulators proposed modified regulations that, if finalized, would enable them to grant financial institutions broader exemptions to the SAR filing requirements in connection with innovative compliance approaches.[2]

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Tips for Creating a Sensible Cybersecurity and AI Risk Framework for Critical Vendors

by Avi Gesser, Anna Gressel, Zila Reyes Acosta-Grimes, and Michael Bloom

Companies face increasing cybersecurity and AI risk from third-party vendors. Cybersecurity risks arise when companies share sensitive personal data or company information with their vendors or when their vendors have direct access to the company’s information systems. Companies using AI technology that is developed by a vendor can also face risk if the AI behaves unexpectedly, and that results in negative impacts including on critical business operations. In recognition of these kinds of third-party data risks, on October 30, 2020, federal banking agencies—including the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”) and the Federal Deposit Insurance Corporation (“FDIC”)—released a joint paper (the “Joint Paper”) outlining sound practices designed to help banks increase operational resilience.

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2021 AML Trends and Developments (Part I of III)

by Franca Harris Gutierrez, Boyd Johnson, Bruce Newman, Michael Dawson, Zachary Goldman, Rachel Dober, Michael Romais, Alina Lindblom, and Andrew Miller

Anti-money laundering (“AML”) issues have been a focus of regulators and law enforcement for the past decade and will likely continue to be a priority issue area for the Biden Administration. The AML landscape is shifting considerably as a series of regulatory actions in the last months of 2020 and the January 1, 2021 passage of the National Defense Authorization Act for Fiscal Year 2021 (“NDAA”)[1] — adopted with bipartisan support overriding President Trump’s veto—bring real change to the regulatory environment at the start of the new administration. Indeed, the NDAA is the most significant amendment to the AML landscape in a generation, since the adoption of the USA PATRIOT Act, and will require extensive implementation by the Treasury Department. The regulatory and legislative changes together have two principal themes: (i) a conscious effort to evolve AML compliance and the Bank Secrecy Act and its implementing regulations (collectively, the “BSA”) to make the system more efficient and effective; and (ii) adapting the BSA to a new generation of threats.

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Antitrust and Competition: Investment Firms’ Voting Rights—The Devil is in the Potential Antitrust Liability

by Frédéric Louis, Anne Vallery, Álvaro Mateo Alonso, and Édouard Bruc

On January 27, 2021, the Court of Justice of the European Union (“CJEU”) issued an important  ruling regarding an investment fund’s liability for the cartel behaviour of an affiliate. The CJEU confirmed that an investment fund is liable under Article 101 of the Treaty on the Functioning of the European Union based on holding 100% voting rights over an indirect affiliate that participated in a cartel, even though the fund held well below 100% equity in that affiliate during part of the relevant period (see here). This judgement tips the scales towards enforcement and away from key defence principles such as the presumption of innocence, or the requirement to sanction only the actual offender. Nonetheless, it sheds some useful insight for financial investors to mitigate antitrust exposure. Continue reading →

The Key Open Questions That Will Determine the Next Four Years of SEC Enforcement

by Charles D. Riely and Michael F. Linden

As President Biden’s administration gets into full swing, many expect future Chairman Gary Gensler’s SEC to take a more aggressive approach to enforcement. Public companies and other market participants are left wondering what, exactly, that means. In this post, we take a detailed look at where the SEC is starting from, what has happened since January 20th, where it goes from here, and what interested parties should be watching for as the “new” SEC ramps up. Continue reading →