Financial Institutions

On December 6, 2021, the National Risk Committee of the Office of the Comptroller of the Currency (OCC) issued its Semiannual Risk Perspective for Fall 2021, which reports on key issues affecting the federal banking system.[1]  The report highlights the “evolving and increasingly complex” danger to the financial system from cyber threats, and encourages banks and financial institutions to adopt robust cyber controls to minimize operational risk.  It also stresses the need for risk-management policies and procedures that are tailored to new technological innovations, including cryptocurrencies and other digital assets.
Continue Reading The Office of the Comptroller of the Currency Warns of Increasingly Complex Cyber Risks for Banks

On November 18, 2021, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve System (Board) announced a final rule requiring banking organizations to notify their primary regulator of certain significant computer-security incidents as soon as possible and no later than 36 hours after they occur.[1]  The rule separately requires bank service providers to notify their bank customers if they experience a cyber incident that causes, or is reasonably likely to cause, a material disruption of services that lasts for four or more hours.
Continue Reading Banking Regulators Approve Final Rule Establishing Cyber Incident Notification Requirements

While large financial institutions have traditionally been hesitant to enter new areas of financial products, particularly virtual assets, many more banks and companies have expressed interest in virtual currencies as cryptocurrency has become increasingly mainstream.  Given the use of such services by terrorist groups, it is important for banks and other financial institutions to consider

On March 3, 2021, the U.S. Securities and Exchange Commission (“SEC”) Division of Examinations (the “Division”)—formerly the Office of Compliance Inspections and Examinations—released its 2021 Examination Priorities (“2021 Priorities”).  The 2021 Priorities generally retain perennial risk areas as the Division’s core focus, but do include several new and emerging risk areas reflecting broader policy shifts under new SEC leadership.

The 2021 Priorities include:  retail investors; information security and operational resilience; financial technology (“Fintech”), including digital assets; anti-money laundering; transition from the London Inter‑Bank Offered Rate (“LIBOR”); several areas covering registered investment advisers and investment companies; market infrastructure; and oversight of the Financial Industry Regulatory Authority and Municipal Securities Rulemaking Board programs and policies.  Although not formal priorities, the Division will also focus on climate-related risks and environmental, social and governance (“ESG”) matters in light of recent market developments and broader attention in these areas.
Continue Reading Turning the Page: Highlights of the SEC’s Division of Examination’s 2021 Priorities

Main Takeaways

Recommendations 01/2020 of the European Data Protection Board (the “EDPB”) on measures that supplement transfer tools to ensure compliance with the EU level of protection of personal data (the “Recommendations”)[1] attempt to provide a step-by-step roadmap to help EU data exporters transfer personal data outside the EU to third countries in a manner consistent with the judgment of the Court of Justice of the European Union (the “CJEU”) handed down on July 16, 2020, in Data Protection Commissioner v. Facebook Ireland and Maximillian Schrems (“Schrems II”, further described in Section 1 below).[2] The Recommendations were published on November 11, 2020 and can be relied upon immediately, even though they are subject to public consultation, with comments being due prior to December 21, 2020.
Continue Reading Recommendations of the EDPB Further to the CJEU’s Schrems II Judgment: One Step Forward, Two Steps Back?

Last month, the Financial Services Information Sharing and Analysis Center[1] (“FS-ISAC”) warned financial services companies, and particularly smaller firms, of a substantial increase in attempted cyberattacks since the start of the COVID-19 pandemic.  In particular, cyber-attacks targeted at bank employees rose in the first quarter of 2020.  As of early April, FS-ISAC had also identified over 1,500 fraudulent or phishing websites designed to look like pandemic-related lending or financial support programs to deceive visitors into disclosing sensitive personal information.
Continue Reading FS-ISAC Warns that Cyberattacks Against Financial Services Firms Increased Substantially in Response to COVID-19 Mitigation Efforts

The emergence of online, non-traditional financial service platforms creates additional avenues for terrorist groups to receive and transfer funds outside of the traditional banking system.  One consequence of this trend is the potential for increased litigation against these providers under U.S. statutes that create civil liability for provision of material support to terrorists: the Anti-Terrorism Act (the “ATA”), 18 U.S.C. § 2333(a), and the Justice Against Sponsors of Terrorism Act (“JASTA”), 18 U.S.C. § 2333(d)(2).

Civil claims for damages under the ATA and JASTA have historically been brought against large banks for providing financial services to entities with alleged terrorist links.  Typically in such cases, victims of a terrorist attack and/or their family members allege that the bank supported the attack by processing U.S. dollar denominated transactions to an entity with links to terrorism (often through a chain of intermediaries).  In recent years, the range of entities against which ATA and JASTA claims have been brought has increasingly expanded to include companies outside of the banking sector, such as pharmaceutical companies, government contractors, and social media platforms.  As terrorist groups increase their use of non-traditional financial service platforms, cryptocurrency exchanges, decentralized fintech platforms, and other similar businesses may begin to face ATA and JASTA claims.
Continue Reading Online Financial Service Companies:  The Anti-Terrorism Act’s Next Frontier

In 2019, boards and senior management across a range of industries continued to cite cybersecurity as one of the most significant risks facing their companies.

At the same time, comprehensive data privacy regulation became a new reality in the United States as many companies implemented major revisions to their privacy policies and data systems to

On October 11, 2019, the leaders of the Commodity Futures Trading Commission, Financial Crimes Enforcement Network, and Securities and Exchange Commission issued a joint statement to remind businesses that engage in digital asset activities of their anti-money laundering (“AML”) and countering the financing of terrorism (“CFT”) obligations under the Bank Secrecy Act (“BSA”).

As market

In late July 2019, U.S. federal and state regulators announced three headline‑grabbing data privacy and cybersecurity enforcement actions against Equifax and Facebook.  Although coverage of these cases has focused largely on their striking financial penalties, as important are the terms the settlements imposed on the companies’ operations as well as their officers, directors, and compliance professionals—and what they signal about potential future enforcement activity to come.
Continue Reading July 2019 Privacy and Cybersecurity Enforcement: Lessons for Management and Directors