CUBE RegNews:
October 23^rd

Long-term debt requirements consultation extended

The Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation have confirmed that they have extended the consultation period to consider a proposed rule would require certain large depository institution holding companies, US intermediate holding companies of foreign banking organizations, and certain insured depository institutions, to issue and maintain outstanding a minimum amount of long-term debt. 

Originally set at 30 November 2023, the consultation period has now been extended to 16th January 2024 “to allow interested parties more time to analyze the issues and prepare their comments.” 

FinCEN expands GTO coverage

The Financial Crimes Enforcement Network (FinCEN) has announced an expansion of its Geographic Targeting Orders (GTOs), which require title insurance companies offering policies to homebuyers to identify the persons behind companies used in non-financed purchases of residential real estate.  

The purpose of the GTO is to identify any illicit entities which may be using funds to acquire property. The expanded coverage takes in additional counties in Massachusetts, Florida and Texas. FinCEN has also issued a FAQ document to explain more about GTOs and their purpose. 

FinCEN alert urges firms to be extra-vigilant

Following the attacks by Hamas earlier in October, the Financial Crimes Enforcement Network (FinCEN) has issued an alert reminding firms of the importance of identifying and reporting any suspicious transactions associated with Hamas and other sanctioned entities. The alert includes useful red flag indicators including the following.  

• A customer engages with OFAC-designated entities or transactions tied to them, including email addresses, physical addresses, phone numbers, or passport numbers, or virtual currency addresses. 
• Transactions between customers indicate support for terrorist campaigns. 
• A customer transacts with high-risk Money Services Businesses (MSBs) in jurisdictions associated with Hamas, having lax customer due diligence (CDD) or failing to comply with AML/CFT best practices. 
• A customer engages with entities connected to Iran or Iran-supported terrorist groups, like Hizballah and Palestinian Islamic Jihad. 
• Customers that are charitable or nonprofit organizations solicit donations but show no evidence of providing charitable services or support terrorist activity. 
• Customers that are c haritable or nonprofit organizations receive large donations from unknown sources and transfer significant amounts to other similar organizations. 
• A customer conducts transactions involving virtual currency addresses associated with terrorism or terrorist financing donation campaigns. 

FinCEN requests financial institutions reference this alert by including the key term “FIN-2023- TFHAMAS” in SAR field 2 (Filing Institution Note to FinCEN) and the narrative to indicate a connection between the suspicious activity being reported and this alert. 

HKMA and SFC update virtual asset guidance

The Securities and Futures Commission (SFC) and the Hong Kong Monetary Authority (HKMA) have published a joint circular updating the previous 28 January 2022 joint circular on intermediaries’ virtual asset-related activities. 

The update follows a surge of inquiries from intermediaries keen to offer virtual assets (VAs) to their clients. Noting the unevenness of the global regulatory landscape and the nature of many VAs, the circular notes many should be considered as complex products and hence the regulators consider greater safeguards are needed. Two additional measures are therefore being introduced: 

• Selling restrictions – VA-related products  considered complex products should only be offered to professional investors, save for a limited suite covered in the circular.  
• Virtual asset-knowledge test – Except for institutional professional investors and qualified corporate professional investors , intermediaries should assess whether clients have knowledge of investing in virtual assets or VA-related products prior to effecting a transaction in VA-related products on their behalf If a client does not possess such knowledge, the intermediary may only proceed if it has provided adequate training to the client on the nature and risks of virtual assets. 

The circular also notes intermediaries should only partner with SFA-licensed VA trading platforms to offer VA services. The circular notes there is a three-month transition period “for intermediaries serving existing clients of its VA dealing services before the full implementation of the expected requirements in this circular.”