Legislative Activity

Senate Banking Sets Its Sights Overseas

In the coming weeks, the Senate Banking Committee will turn its focus to a number of international-related financial services issues. First, on Tuesday, May 10, the Committee will hold a hearing to evaluate the financial risks of China. Additionally, toward the end of the month, the Committee will hold two hearings to discuss the role and impact of Iran sanctions.  In addition to hearing from academics and other subject matter experts, on May 25, lawmakers will hear from Adam Szubin, Acting Under Secretary of the Treasury for Terrorism and Financial Crimes, whose nomination still awaits Senate confirmation. Relatedly, Mr. Szubin’s nomination is not the only Obama Administration nominee caught up in the Senate.  In fact, as of this time, the Senate Banking Committee has yet to reschedule a vote on several pending financial services-oriented nominees – including two Securities and Exchange Commission (SEC) Commissioners, as well as officials to the Treasury Department, the Federal Deposit Insurance Corporation’s (FDIC) Office of the Inspector General, and the United States Mint.

This Week’s Hearings:

• Tuesday, May 10: The Senate Banking Committee will hold a hearing titled “Evaluating the Financial Risks of China.”

• Thursday, May 12: The House Financial Services Subcommittee on Housing and Insurance will hold a hearing titled “The Future of Housing in America: A Comparison of the United Kingdom and United States Models for Affordable Housing.”

Regulatory Activity

CFPB’s Efforts to Axe Arbitration Come Under Attack

Last Thursday, May 5, the Consumer Financial Protection Bureau (CFPB or Bureau) issued its long-awaited proposed rulemaking that would: (1) prohibit covered providers of certain consumer financial products and services from using an agreement with a consumer that provides for arbitration of any future dispute between the parties to bar the consumer from filing or participating in a class action with respect to the covered consumer financial product or service; and (2) require a covered provider that is involved in an arbitration pursuant to a pre-dispute arbitration agreement to submit specified arbitral records to the Bureau. The rulemaking stems from a provision in the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) requiring the CFPB to study the effects of mandatory arbitration. In response to the proposal, various Republicans have already pushed back and announced that they are investigating how the Bureau conducted the study. Once published in the Federal Register, the CFPB will accept comments on the rulemaking for 90 days.

Financial Transparency, Money Laundering, Corruption, and Tax Evasion

Late on Thursday, May 5, the White House issued a fact sheet on steps the Administration is taking to strengthen financial transparency and combat money laundering, corruption, and tax evasion. Acknowledging that the so-called “Panama Papers” – millions of leaked documents reportedly revealing the use of anonymous offshore shell companies – have brought the issues of illicit financial activity and tax evasion into the spotlight, the new steps outlined include:

• Issuing final Treasury Department regulations on “Customer Due Diligence” that enhance transparency and protect the integrity of the financial system by requiring financial institutions to know and keep records on who actually owns the companies that use their services;

• Issuing new proposed Treasury/Internal Revenue Service (IRS) tax rules closing a loophole allowing foreigners to hide assets or financial activity behind anonymous entities established in the United States;

• Putting forward new legislative proposals to strengthen U.S. tools to fight corruption and money laundering; and

• Calling on Congress to act on long-overdue proposals that help crack down on tax evasion.