September 23, 2021

Banks Continue Efforts To Block IRS Mandate; Treasurer Fitzpatrick Voices Opposition

As banks continue their efforts to block the inclusion of a controversial tax reporting provision in the $3.5 trillion social spending bill, the measure is garnering the attention of elected officials.

This week, Missouri Treasurer Scott Fitzpatrick joined a coalition of 22 state financial officers opposing a proposal that calls for financial institutions to report customer account information to the IRS if the accounts exceed $600 of inflows and outflows.

“These proposals follow a troubling pattern of increasing government overreach … they are not considering the potential impact on small businesses and our small community banks,” Fitzpatrick said. “The impact of these proposals touches millions of Americans — and puts their data privacy at risk. Not only that, it might discourage unbanked Americans from opening bank accounts, which is detrimental to their financial health.”

Missouri Reps. Sam Graves, Vicky Hartzler, Billy Long, Blaine Luetkemeyer, Jason Smith and Ann Wagner have expressed their concerns over this controversial proposal that:

• could lead to higher tax preparation costs and concerns for taxpayers
• could also undermine public trust in banks and hinder progress toward promoting financial inclusion
• would require significant systems and processes changes for banks, with material costs and disruption

In an interview this week, MBA Executive Vice President Jackson Hataway said the $600-dollar threshold would affect the vast majority of bank customers.

“Basically, affects every consumer at every bank,” Hataway said. “There will certainly be those who have underneath the $600 threshold, but the vast majority of accounts will be subject to this kind of regulation and intrusive action from the government.”

The fight on Capitol Hill over the controversial tax proposal is likely to go on for another four to six weeks, and the proposal may continue to be raised after that, according to James Ballentine, American Bankers Association executive vice president. On the latest episode the ABA Banking Journal Podcast, Ballentine joins ABA President and CEO Rob Nichols and ABA Vice President John Kinsella to dig into the details of the proposal and its legislative outlook.

• privacy concerns and operational challenges banks would face
• the impact of the proposal on the unbanked rate
• the current state of play on Capitol Hill and the near-term outlook
• what bankers and their clients can do take action

MBA urges banks and their customers to continue their grassroots efforts to ensure that this provision stays out of any future versions of the bill. MBA has shared posts on Facebook, Twitter, LinkedIn and Instagram.

ABA, Trade Groups: IRS Reporting Proposal Raises Data Privacy Concerns

The American Bankers Association, along with more than 40 trade associations representing a broad range of U.S. businesses, sent a joint letter to House leadership and members expressing concerns about a controversial tax reporting provision floated by President Biden’s administration that would expand mandatory IRS reporting on bank account information. The proposal would require financial institutions to track and provide the IRS with the inflows and outflows of every account above a de minimis threshold of $600.

“While the stated goal of this vast data collection is to uncover tax dodging by the wealthy, this proposal is not remotely targeted to that purpose or that population,” the associations wrote. “In addition to the significant privacy concerns, it would create tremendous liability for all affected parties by requiring the collection of financial information for nearly every American without proper explanation of how the IRS will store, protect, and use this enormous trove of personal financial information. We believe that this program is costly for all parties, not fit for purpose, and loaded with potential for unintended and serious negative consequences.”

‌Although the proposal was not included in the earliest stages of the bill’s consideration, administration officials have signaled that it remains a priority for the Biden White House. ABA continues to urge banks and their customers to contact their representatives to ensure this provision stays out of any future versions of the bill. To help engage bank customers on this issue, ABA has created sample language for customer communications and social media posts banks can use.‌ 

House Committee Votes To Include Cannabis Banking Bill In NDAA

In an overwhelming, bipartisan vote this week, the House Rules Committee agreed to include the SAFE Banking Act — a bill that provides clarity to financial institutions seeking to serve legitimate cannabis businesses — as an amendment to the National Defense Authorization Act. The bill, which passed the House in the last Congress but was not taken up in the Senate, would provide a safe harbor for depository institutions serving cannabis businesses in states where such activity is legal. More than 35 states have legalized cannabis for medical or adult use, but current federal law prevents banks from safely banking cannabis businesses, including ancillary businesses that provide them with goods and services.

ABA Highlights Industry Progress To Help Customers Securely Share Financial Data

In a statement for the record shared ahead of a House Financial Services subcommittee hearing on consumer access to personal financial data, the American Bankers Association emphasized that it fully supports customers’ ability to access and share their financial data in a secure, transparent manner that gives them control.

With the issue of customer access to financial records on the Consumer Financial Protection Bureau’s rulemaking agenda for April 2022, ABA called for the CFPB to provide clarity to allow the market to continue to develop.

“We believe [the CFPB] should focus on supporting market developments that are already well underway. Overly prescriptive standards risk undermining the progress that has been made and if not well crafted, may leave consumers exposed,” ABA wrote.

The association added that the CFPB also should clarify that the Gramm-Leach-Bliley Act of 1999, which creates a legal framework for protecting consumer data, applies to financial data throughout its lifecycle. ABA also said Congress should urge the CFPB to coordinate with banking regulators in any rulemaking and bring data aggregators under direct supervision.

FOMC: Asset Purchases May Be ‘Moderated’ If Economic Progress Continues

If the economy continues to improve broadly, “a moderation in the pace of asset purchases may soon be warranted,” the Federal Open Market Committee said. Since last December, the economy has made progress toward the committee’s goals of maximum employment and price stability, and the committee said it expects that progress to continue.

The target range for the federal funds rate will stay at zero to 0.25%, the committee said, adding that it expects it will maintain that range until inflation has risen to 2%, is on track to moderately exceed 2% and maximum employment is reached.

Meanwhile, elevated inflation will likely remain in the coming months before moderating, Federal Reserve Chairman Jerome Powell said in a press conference after the release of the FOMC statement. He added that supply chain bottlenecks have been larger and longer lasting than anticipated and have led to upward revisions to inflation projections for this year.

The sectors of the economy most affected by the pandemic have improved recently, but a rise in COVID-19 cases have slowed their recovery, the FOMC added. “The path of the economy continues to depend on the course of the virus. Progress on vaccinations will likely continue to reduce the effects of the public health crisis on the economy, but risks to the economic outlook remain,” the committee said.

Treasury Announces Steps To Counter Ransomware Threat

As part of its ongoing efforts to counter the growing threat of ransomware, the Treasury Department’s Office of Foreign Assets Control released an updated advisory on potential sanctions risks for facilitating ransomware payments. The advisory emphasized that the government discourages paying cyber ransom or extortion demands and stresses the importance of improving cybersecurity.

OFAC also announced sanctions against a virtual currency exchange for the first time. OFAC designated SUEX OTC for facilitating financial transactions for ransomware. More than 40% of SUEX's known transactions history is associated with illicit actors, Treasury said.

The action blocks U.S. citizens and entities from engaging in transactions with SUEX and opens sanctions or enforcement action against financial institutions engaged in transactions with the virtual currency exchange.

OCC Updates Comptroller’s Handbook Booklet

The Office of the Comptroller of the Currency issued an update to its earnings and regulatory reporting booklets in the Comptroller’s Handbook. The earnings booklet provides information on how to complete an earnings analysis and procedures to use when reviewing earnings for a specific line of business or the bank as a whole. The regulatory reporting booklet provides information for examiners on common financial regulatory reports, including the call report and other Federal Financial Institutions Examination Council financial reports.

ABA To Host Webinar On Tackling Cyber Threats

The American Bankers Association will host a free webinar at 11:30 a.m. Wednesday, Oct. 6, on addressing cyber threats. The webinar will cover the latest trends from regulations to ransomware and ways to protect customers. The event also will feature a question-and-answer session following the presentation.

ABA To Host Free Webinars On FedNow Service

The American Bankers Association will host a two-part webinar series on the implementation of the Federal Reserve’s FedNow service. The first webinar, “Getting to Know the FedNow Serivce and How to Prepare,” will take place at 1 p.m. Thursday, Oct. 14. The second webinar, “Introducing FedNow Explorer — A Guide for Your Instant Payments Journey,” will take place at 1 p.m. Wednesday, Nov. 3.

Presenters will review FedNow features and best practices for implementation and provide an overview of the FedNow Service Readiness Guide designed to help with preparation. Fed officials will answer questions and provide a live demonstration of how to use FedNow Explorer, a digital experience launching this fall that will guide banks on their journey to implement instant payments. This free webinar series is available to ABA bank members and state association members.