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Top Story Compliance Related

04/02/2021

FinCEN works toward new beneficial ownership rule

FinCEN has announced an Advance Notice of Proposed Rulemaking to solicit public comment on a wide range of questions related to the implementation of the beneficial ownership information reporting provisions of the Corporate Transparency Act (CTA).

This ANPRM is the first in a series of regulatory actions that FinCEN says it will undertake to implement the CTA, which is included within the Anti-Money Laundering Act of 2020 (AML Act). The AML Act is part of the FY 2021 National Defense Authorization Act, which became law on January 1, 2021.

The CTA amended the Bank Secrecy Act to require corporations, limited liability companies, and similar entities to report certain information about their beneficial owners (the individual natural persons who ultimately own or control the companies). FinCEN says the new reporting requirement will enhance the national security of the United States by making it more difficult for malign actors to exploit opaque legal structures to launder money, finance terrorism, proliferate weapons of mass destruction, traffic humans and drugs, and commit serious tax fraud and other crimes that harm the American people.

The CTA requires FinCEN to maintain the reported beneficial ownership information in a confidential, secure, and non-public database. Furthermore, the CTA authorizes FinCEN to disclose beneficial ownership information subject to appropriate protocols and for specific purposes to several categories of recipients, such as federal law enforcement. Finally, the CTA requires FinCEN to revise existing financial institution customer due diligence regulations concerning beneficial ownership to take into account the new direct reporting of beneficial ownership information.

The ANPRM is scheduled for Federal Register publication on April 5, 2021. Comments on the ANPRM should be submitted by May 5, 2021.

04/01/2021

IRS to recalculate taxes on unemployment benefits

To help taxpayers, the Internal Revenue Service has announced that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes. Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

04/01/2021

FDIC updates National Rates and National Rate Caps webpage

FDIC FIL-24-2021 announces that, on April 1, 2021, the FDIC’s revised methodology for calculating the national rate, the national rate cap, and the local market rate cap for banks that are less than well capitalized under Section 337.7 of the FDIC’s Rules and Regulations (see FIL-113-2020) go into effect. As of 8:00 AM ET today (April 1, 2021), FDIC’s web page for National Rates and National Rate Caps reflects the change in calculation methodology; going forward, updated National Rates and Rate Caps will, in general, be posted on the third Monday of the month.

The FDIC also released FIL-23-2021 with information on the revised Brokered Deposit Regulation, and a new framework for analyzing the primary purpose exception (“PPE”) that includes a notice process for certain designated exceptions and an application process for entities that wish to invoke the PPE but do not meet one of the designated exceptions. To facilitate the implementation of the new regulations, the FDIC has added a Brokered Deposits webpage to the Banker Resource Center to provide information about the regulation, including filing instructions for the notice and application process. This new webpage became available at 8:00 AM ET on April 1, 2021. The full compliance date with respect to the brokered deposit revisions is January 1, 2022.

04/01/2021

FDIC Consumer Compliance Supervisory Highlights

The FDIC has issued FIL-22-2021 to announce the release of the latest issue of the FDIC’s Consumer Compliance Supervisory Highlights, which provides an overview of consumer compliance issues identified through the FDIC’s supervision of state non-member banks and thrifts in 2020. This edition includes:

  • A summary of the FDIC’s supervisory approach in response to COVID-19;
  • A description of the most frequently cited violations and other consumer compliance examination observations;
  • Information on regulatory developments; and
  • A summary of consumer compliance resources and information available to financial institutions

A table of most frequently cited violations highlights the numbers of Level 2 and Level 3 violations (there are three levels of concern from 1 to 3, with Level 1 representing the lowest level of concern), indicating that the most frequently cited violations (representing approximately 74 percent of the total violations cited in 2020) involve: the Truth in Lending Act (TILA), Truth in Savings Act (TISA), Flood Disaster Protection Act (FDPA), Electronic Funds Transfer Act (EFTA), and the Real Estate Settlement Procedures Act (RESPA).

The report section on Consumer Compliance Examination Observations focuses on matters involving RESPA, TILA and fair lending.

04/01/2021

Federal Reserve FAQs on longstanding regulations

The Federal Reserve Board has announced it has published frequently asked questions (FAQs) comprising existing legal interpretations related to a number of the Board's longstanding regulations. The FAQs are intended to increase transparency and enhance accessibility to Board and Board staff legal interpretations. The FAQs include legal interpretations that have been formulated over time in response to specific requests related to each regulation. Each set includes significant existing interpretations of the regulation, including those found in Board orders, letters to specific requestors, and other sources, as well as those not previously available in written form.

There are currently separate pages of FAQs for regulations H, K, L, O, W and Y. An FAQs table of contents provides a list of the FAQs with the date of their most recent update, and links to the individual FAQ pages.

04/01/2021

Fed Board adopts final rule on use of supervisory guidance

The Federal Reserve Board has adopted a final rule outlining and confirming the use of supervisory guidance for regulated institutions. The final rule generally codifies a statement issued in September 2018 clarifying the differences between regulations and guidance and is substantially similar to the proposal issued last year. Unlike a law or regulation, supervisory guidance does not have the force and effect of law, and the agencies do not take enforcement actions based on supervisory guidance. Rather, guidance outlines expectations and priorities, or articulates views regarding appropriate practices for a specific subject. The rule will be effective 30 days after publication in the Federal Register and mirrors the rules issued earlier by the CFPB, the FDIC, the NCUA, and the OCC.

04/01/2021

CFPB rescinds temporary flexibilities statements

The CFPB announced Wednesday that it is rescinding, effective today (April 1) seven policy statements issued last year that provided temporary flexibilities to financial institutions in consumer financial markets including mortgages, credit reporting, credit cards and prepaid cards. With the rescissions, the CFPB is providing notice that it intends to exercise the full scope of the supervisory and enforcement authority provided under the Dodd-Frank Act, to ensure the industry complies with consumer protection laws. The CFPB is also rescinding its 2018 bulletin on supervisory communications and replacing it with a revised bulletin describing its use of matters requiring attention (MRAs) to effectively convey supervisory expectations.

The rescissions of policy statements, which will be published in the Federal Register, include:

  • Rescission of the March 26, 2020, Statement on Bureau Supervisory and Enforcement Response to COVID-19 Pandemic.

    This rescission also withdraws the CFPB as a signatory to the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (April 7, 2020) and the Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (April 14, 2020).

  • Rescission of the March 26, 2020, Statement on Supervisory and Enforcement Practices Regarding Quarterly Reporting Under the Home Mortgage Disclosure Act.

    This rescission also instructs all financial institutions required to file quarterly to do so beginning with their 2021 first quarter data, due on or before May 31, 2021, for all covered loans and applications with a final action taken date between January 1 and March 31, 2021.

  • Rescission of the March 26, 2020, Statement on Supervisory and Enforcement Practices Regarding CFPB Information Collections for Credit Card and Prepaid Account Issuers.

    This rescission also provides guidance as to how entities should now meet the specified information collections requirements relating to credit card and prepaid accounts.

  • Rescission of the April 1, 2020, Statement on Supervisory and Enforcement Practices Regarding the Fair Credit Reporting Act and Regulation V in Light of the CARES Act.

    This rescission leaves intact the section entitled “Furnishing Consumer Information Impacted by COVID-19” which articulates the CFPB’s support for furnishers’ voluntary efforts to provide payment relief and that the CFPB does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflect the payment relief measures they are employing.

  • Rescission of the April 27, 2020, Statement on Supervisory and Enforcement Practices Regarding Certain Filing Requirements Under the Interstate Land Sales Full Disclosure Act (ILSA) and Regulation J.

    The rescission instructs land developers subject to ILSA and Regulation J to resume filing of annual reports of activity and financial statements as specified in Regulation J.

  • Rescission of the May 13, 2020, Statement on Supervisory and Enforcement Practices Regarding Regulation Z Billing Error Resolution Timeframes in Light of the COVID-19 Pandemic
  • Rescission of the June 3, 2020, Statement on Supervisory and Enforcement Practices Regarding Electronic Credit Card Disclosures in Light of the COVID-19 Pandemic
  • CFPB Bulletin 2021-01, which rescinds and replaces Bulletin 2018-01 (Changes to Types of Supervisory Communications).

    Bulletin 2021-01 announces changes to how CFPB examiners articulate supervisory expectations. It states that the CFPB will continue to rely on MRAs, explains the circumstances under which it will do so, and announces that the CFPB will discontinue use of Supervisory Recommendations.

03/31/2021

Student emergency COVID aid not taxable

The IRS announced yesterday it has issued frequently asked questions on how students and higher education institutions should report pandemic-related emergency financial aid grants.

Students: Emergency financial aid grants made by a federal agency, state, Indian tribe, higher education institution or scholarship-granting organization (including a tribal organization) to a student because of an event related to the COVID-19 pandemic are not included in the student's gross income.

Also, students should not reduce an amount of qualified tuition and related expenses by the amount of an emergency financial aid grant. If students used any portion of the grants to pay for qualified tuition and related expenses on or before December 31, 2020, they may be eligible to claim a tuition and fees deduction or the American Opportunity Credit or Lifetime Learning Credit on their 2020 tax return. The tuition and fees deduction is not available for tax years beginning after December 31, 2020. Additional information on these credits and the tuition and fees deduction can be found in IRS Publication 970, Tax Benefits for Education.

Higher Education Institutions: Because students don't include emergency financial aid grants in their gross income, higher education institutions are not required to file or furnish Forms 1099-MISC reporting the grants made available by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) or the COVID-related Tax Relief Act (COVID Relief Act) and do not need to report the grants in Box 5 of Form 1098-T.

But any amounts that qualify for the tuition and fees deduction or the American Opportunity Credit or Lifetime Learning Credit are considered "qualified tuition and related expenses" and trigger the reporting requirements of Internal Revenue Code section 6050S. Higher education institutions must include qualified tuition and related expenses paid by emergency financial aid grants awarded to students in Box 1 of Form 1098-T.

03/30/2021

Whistleblower awarded over $500,000

The Securities and Exchange Commission (SEC) has awarded more than $500,000 to a whistleblower who raised concerns internally before submitting a tip to the Commission. The whistleblower's information and assistance allowed the Commission and another agency to quickly file actions, shutting down an ongoing fraudulent scheme. The whistleblower's information prompted an internal investigation by the company, which then reported to an outside agency, which in turn provided the information to the SEC. Separately, the whistleblower also reported to the SEC within 120 days of reporting the violations internally to the company. Under the "safe harbor" provision of the SEC's whistleblower rules, the SEC treats the whistleblower's information as though it had been submitted to the SEC at the same time it was internally reported as long as the whistleblower also reports the information to the SEC within 120 days of the internal report.

03/30/2021

IRS clarifies tax deadline changes

The IRS has issued a news release to clarify its extension of certain taxpayer deadlines from April 15 to May 17, 2021. In addition to postponing to May 17 the deadline for individuals to file their tax returns and pay any tax due for calendar year 2020, the IRS action:

  • Moved to May 17 the deadline for tax year 2020 contributions to IRAs and health savings accounts (which are tied to the tax filing deadline). Also affected are contributions to Archer Medical Savings Accounts and Coverdell education savings accounts.
  • Delayed to May 17 the time for reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans.
  • Postpones the due date for Form 5498 series returns to June 30, 2021.
  • Extended to May 17, 2021, the deadline for claiming a refund on tax year 2017 income tax returns
  • Delayed the application deadline for tax preparers interested in voluntarily participating in the Annual Filing Season Program for calendar 2021 until May 17, 2021.

The normal April 15, 2021, due date for estimated tax payments for tax year 2021 was not changed. And, as noted in earlier IRS notice, the change to federal tax due dates does not affect state tax filing or payment due dates unless a state's due dates are tied by law to the federal deadlines or a state acts to change its due dates. Also not affected by these federal tax date changes are the previously announced postponements to June 15 for individual and business taxpayers in Texas, Louisiana and Oklahoma impacted by winter storms.

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