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The FDIC has released Financial Institution Letter FIL-49-2023 to announce a new Banker Engagement Site (BES) through FDICconnect. BES provides a secure and efficient portal to exchange documents, information, and communications for consumer compliance and Community Reinvestment Act (CRA) examinations. Specifically, BES provides a financial institution’s authorized staff the ability to communicate with FDIC examination staff and to respond to the information and document requests made throughout the supervisory process.

BES is being introduced as the primary tool for exchanging examination planning and other information for Division of Depositor and Consumer Protection (DCP) consumer compliance and CRA activities. BES offers new functionality to improve the banker experience in pre-examination process and improves efficiencies through the following features:

• The ability for bank users to collaborate with the FDIC’s examination team when responding to information and document requests;
• The capability to submit questions and comments to the examination team;
• The ability to view submitted responses and documents;
• The capability to associate responses with specific requests;
• The ability to manage the bank’s user roles and permissions;
• The availability of informative user guides and training resources;
• Contact information for the examination team;
• Access to the pre-examination planning response provided for the previous examination; and
• An ability to opt-out of using BES (institutions will be provided an alternative method to respond to pre-examination planning requests and to exchange information).

The FDIC’s existing tool to exchange examination information, the Enterprise File Exchange (EFX), will continue to be used when the pre-planning for consumer compliance and CRA activity initiated prior to the availability of BES and also may be utilized in some additional circumstances. The FDIC’s examination management will inform financial institutions, during their initial pre-examination contact, of the application that will be used for their examination during the transition to BES. BES is designed to support the consumer compliance examination process and is not planned for the use in other FDIC examinations, such as safety and soundness examinations. For such activities where BES is not used, institutions should continue to use EFX and reference FIL-63-2019.

BES is integrated with the FDIC’s identity access system via FDICconnect for user authentication. External users must be registered with FDICconnect to benefit from the enhanced capability provided by BES. External users will continue to be authenticated using a secure two-factor authentication process.

The Department of Homeland Security has published [88 FR 60056] in this morning's Federal Register a proposal that would amend the REAL ID regulations to waive, on a temporary and state-by-state basis, the regulatory requirement that mobile or digital driver’s licenses or identification cards (“mobile driver’s licenses” or “mDLs”) must be compliant with REAL ID requirements to be accepted by Federal agencies for official purposes, as defined by the REAL ID Act, when full enforcement of the REAL ID Act and regulations begins on May 7, 2025.

This proposed rule is part of an incremental rulemaking that would temporarily permit Federal agencies to accept mDLs for official purposes until TSA issues a subsequent rule that would set comprehensive requirements for mDLs. TSA believes it is premature to issue such requirements before the May 7, 2025, deadline due to the need for emerging industry standards and government guidelines to be finalized.

Comments on the proposal will be accepted through October 16, 2023.

The Treasury Department and the Internal Revenue Service have released proposed regulations on the sale and exchange of digital assets by brokers, in an effort to crack down on tax cheats while helping law-abiding taxpayers know how much they owe on the sale or exchange of digital assets.

The proposed regulations, which are open for public comment and feedback until October 30, 2023, would require brokers of digital assets to report certain sales and exchanges. The proposed regulations would clarify and adjust the rules regarding the tax reporting of information by brokers, so that brokers for digital assets are subject to the same information reporting rules as brokers for securities and other financial instruments.

Under current law, taxpayers owe tax on gains and may be entitled to deduct losses on digital assets when sold, but for many taxpayers it is difficult and costly to calculate their gains. These proposed rules require brokers to provide a new Form 1099-DA to help taxpayers determine if they owe taxes, and would help taxpayers avoid having to make complicated calculations or pay digital asset tax preparation services in order to file their tax returns. These regulations align tax reporting on digital assets with tax reporting on other assets, and, as a result, avoid preferential treatment between different types of assets.

Under the proposed rules, the first year that brokers would be required to report any information on sales and exchanges of digital assets is in 2026, for sales and exchanges in 2025. 

CFPB Director Rohit Chopra, in remarks yesterday at a White House Roundtable on Protecting Americans from Harmful Data Practices, announced the Bureau has decided to launch a rulemaking to ensure that modern-day digital data brokers are not misusing or abusing consumers' sensitive data.

Chopra described two of the proposals under consideration. First, rules under consideration would define a data broker that sells certain types of consumer data as a “consumer reporting agency” to better reflect today’s market realities. The CFPB is considering a proposal that would generally treat a data broker’s sale of data regarding, for example, a consumer’s payment history, income, and criminal records as a consumer report, because that type of data is typically used for credit, employment, and certain other determinations. This would trigger requirements for ensuring accuracy and handling disputes of inaccurate information, as well as prohibit misuse.

A second proposal under consideration will address confusion around whether so called “credit header data” is a consumer report. Much of the current data broker market runs on personally identifying information taken from traditional credit reports, such as those sold by the big three credit reporting conglomerates – Equifax, Experian, and TransUnion.

This includes key identifiers like name, date of birth, and Social Security number that are contained in consumer reports generated by the credit reporting companies. The CFPB expects to propose to clarify the extent to which credit header data constitutes a consumer report, reducing the ability of credit reporting companies to impermissibly disclose sensitive contact information that can be used to identify people who don’t wish to be contacted, such as domestic violence survivors.

The Bureau intends to publish next month an outline of proposals and alternatives under consideration for a proposed rule. The CFPB will soon convene a small business panel to help craft the rule, which the Bureau plans to propose for comment in 2024.

The Small Business Administration has announced six new recipients and $6 million in total funding for the SBA's Cybersecurity for Small Business Pilot Program. All six grantees are state entities that will assist small businesses in advancing cybersecurity infrastructure and mitigating cyber threats.

• Colorado Office of Economic Development & International Trade
• Indiana Economic Development Corporation
• Ohio State University
• Old Dominion University
• State of Hawaii Cybersecurity Assistance for Small Businesses
• University of Wyoming

The federal budget for the SBA’s Cybersecurity for Small Business Pilot Program for 2023-2024 is $6 million, and the SBA awarded six grants of $1 million each. The period of performance for this award is one year, beginning August 31, 2023.

The Federal Deposit Insurance Corporation (FDIC) has published its 2023 Risk Review. The report summarizes conditions in the U.S. economy, financial markets, and banking industry.

The 2023 Risk Review provides a comprehensive summary of key developments and risks in the U.S. banking system, as in prior reports, and includes a new section focused on crypto-asset risk. The report focuses on the effects of key risks on community banks in particular, as the FDIC is the primary federal regulator for the majority of community banks in the U.S. banking system.

The FDIC’s Risk Review is an annual publication and based on year-end banking data from the prior year. This year’s expanded report incorporates data and insights related to the recent stress to the banking sector through first quarter 2023.

• Executive Summary

The Federal Reserve Board on Tuesday provided additional information on its program to supervise novel activities in the banks it oversees. Novel activities include complex, technology-driven partnerships with non-banks to provide banking services to customers; and activities that involve crypto-assets and distributed ledger or "blockchain" technology.

The goal of the novel activities supervision program is to foster the benefits of financial innovation while recognizing and appropriately addressing risks to ensure the safety and soundness of the banking system. The program will be integrated into the Federal Reserve's existing supervisory processes, with program experts working alongside current supervisory teams to oversee banks engaged in novel activities.

Also on Tuesday, the Board provided additional information on the process for a state bank supervised by the Federal Reserve to follow before engaging in certain dollar token or stablecoin activity, including demonstrating to its Federal Reserve supervisors that it has appropriate safeguards to conduct the activity safely and soundly.

• Federal Reserve press release
• SR 23-7: Creation of Novel Activities Supervision Program
• SR 23-8/CA 23-5: Supervisory Nonobjection Process for State Member Banks Seeking to Engage in Certain Activities Involving Dollar Tokens

The U.S. Department of Housing and Urban Development has announced publication of updated guidance for Public Housing Authorities (PHAs) and owners of properties participating in HUD Multifamily Assisted Housing programs regarding the treatment of financial benefits received from participation in community solar energy programs or the presence of on-site solar facilities. HUD updated this guidance to make it easier for program participants to understand and implement policies governing participation in solar programs so that residents can benefit from the expansion of these clean energy programs as provided in the Inflation Reduction Act. The new guidance consolidates multiple previously issued policy documents, along with current guidance for HUD programs supporting solar, including:

• New Community Solar Credits in Master Meter Buildings Guidance for Public Housing Authorities, which augments existing PIH guidance in PIH Notice-2022-34-Rate Reduction Incentive Guidance, Treatment of Community Solar Credits on Tenant Utility Bills; PIH Notice 2022-32-Small Rural Frozen Rolling Base Guidance; PIH Notice 2011-3-Energy Performance Contract Guidance; and
• New Housing Notice 2023-09 for Multifamily Assisted Housing property owners

FTC also announces a settlement with bankrupt cryptocurrency platform

The Securities and Exchange Commission has announced it has charged Celsius Network Limited (Celsius) and its founder and former CEO, Alex Mashinsky, for violating registration and anti-fraud provisions of the federal securities laws, including by failing to register the offers and sales of Celsius’s crypto lending product, the Earn Interest Program; making false and misleading statements to investors of the Earn Interest Program and Celsius’s own crypto asset security, CEL; and engaging in market manipulation as it relates to CEL.

Celsius is cooperating with the SEC and has consented to the relief requested in the complaint, which includes a permanent injunction against future securities law violations.

In parallel actions, the U.S. Attorney’s Office for the Southern District of New York announced charges against Mashinsky and a non-prosecution agreement with Celsius, and the Commodity Futures Trading Commission (CFTC) announced charges against Celsius and Mashinsky.

• SEC Complaint

The FTC's settlement
The Federal Trade Commission announced a settlement with bankrupt cryptocurrency platform Celsius Network that will permanently ban it from handling consumers’ assets and charged three former executives with tricking consumers into transferring cryptocurrency onto the platform by falsely promising that deposits would be safe and always available.

The proposed settlement with Celsius and its affiliates will permanently ban the companies from offering, marketing, or promoting any product or service that could be used to deposit, exchange, invest, or withdraw any assets. The companies also agreed to a judgment of $4.7 billion, which will be suspended to permit Celsius to return its remaining assets to consumers in bankruptcy proceedings. The former executives—ex-CEO and co-founder Alexander Mashinsky along with Celsius’s other co-founders Shlomi Daniel Leon and Hanoch “Nuke” Goldstein—have not agreed to a settlement and the FTC’s case against them will proceed in federal court.

The Federal Reserve has announced that 57 early adopter organizations, including financial institutions and service providers, have completed formal testing and certification in advance of the FedNow Service's launch planned for late July. Many of these organizations will be live when the FedNow Service launches in late July or shortly after, with financial institutions ready to send and receive transactions and service providers ready to support transaction activity.

This group of early adopters is now performing final trial runs on the service to confirm their readiness to support live transactions over the new instant payments infrastructure. The early adopters include 41 financial institutions participating as senders, receivers and/or correspondents supporting settlement, 15 service providers processing on behalf of participants, and the U.S. Department of the Treasury.

"We are on track for the FedNow Service launch, with a strong cohort of financial institutions and service providers of all sizes in the process of completing the final round of readiness testing," said Ken Montgomery, first vice president of the Federal Reserve Bank of Boston and FedNow program executive. "With go-live nearing, financial institutions and their industry partners should be confident in moving forward with plans to join the network of organizations participating in the FedNow Service."

Over time, financial institutions are expected to adopt and build on the FedNow Service with the goal of offering new instant payments services to their customers. Montgomery noted that as a platform for innovation, the FedNow Service is intended to support multiple use cases, such as account to account transfer, request for payment, bill pay, and many others.

In addition to working with early adopters, the Federal Reserve continues to work with and onboard financial institutions planning to join later in 2023 and beyond, as the initial step to growing a robust network aiming to reach all 10,000 U.S. financial institutions.