This Week in AML

OCC Proposal Mandating Banking Services

This week, Executive Vice President John Byrne, and Creative Director Elliot Berman of the AML RightSource staff discuss the letter from 22 Democratic members of the House Financial Services Committee to the Comptroller of Currency, urging the OCC to withdraw its notice of proposed rulemaking which would require national banks to provide services to firearms manufacturers and fossil fuel companies. During the conversation they look at the basis of the proposed rule and the concerns raise by the committee members in their letter.


OCC Proposal Mandating Banking Services Transcript

Elliot Berman: Hi, John, how are you this week?

John Byrne: Hi, Elliot. like you hoping that, we go into 2021 and it's 10 times better than 2020.

Elliot Berman: That's a low bar, but yes, I agree. I hope you had you and your family had a good holidays. I know you and I took our first week off since May from doing this, but hope you had some good time off.

I had thought we might talk about the fact that the national defense authorization act would have been passed. And we would have had the anti-money laundering act of 2020 and all that. But, as I think everybody knows who's hearing this, it's been vetoed by the president.

The house has voted to override. We're recording this, middle of the week. And, at this point, the Senate is on the floor, but it's being filibustered, before a vote. So. Probably not a vote for at least for another day, and at that point, it should have enough votes to override when it was approved, but don't know for a fact what the Senate will do.

John Byrne: Yeah. it's going to happen. And then, like I said, we have a lot of programming related to this going forward and just urge folks to continue to monitor. But yeah, it will happen. It just may take a couple extra days.

Elliot Berman: Yeah. So the thing that I did see this week, actually just today - the 22 members of the house financial services committee sent what is effectively a comment letter to the OCC, urging them to withdraw the proposal that they issued on the 20th of November in a notice of proposed rulemaking that would require national banks to provide financial services to gun manufacturers and fossil fuel companies. Did you see that release?

John Byrne: I did. And, obviously you can still file comments on the proposal until, January 4th, but what struck me about this when I first saw it - and this letter can continue to confirm that - was how one-sided this proposal was. The acting Comptroller's a person by the name of Brooks. So I don't know how long he'll be enrolled, but this, talks a lot about, telling financial institutions that they need to be more aware of different businesses and not make decisions on lending and credit allocation based on policy. But if that were their real concerns, in my opinion, they would have also mentioned the impact that some of these issues, these risks decisions have had on the humanitarian and charity world, because that's clearly an area where if they have the appropriate business model, they should be able to make, and have relationships.

So to focus on these entities seems a little out of left field. I'm not being facetious with that phrase, but again is another example in my view of how political the OCC has become in the past couple of years. And I think that will change with the new administration - at least that would be the hope - that we can all deal with these issues, as issues, and not come with them, with a political bend one way or the other.

Elliot Berman: Yeah. It's interesting too, because if you think about it, generally speaking, the starting premise for businesses in the United States is that they have the ability to choose who they do business with as long as they don't discriminate against people who fit into a protected class under one of the various pieces of federal law that give protected status.

And, the proposed rule making certainly doesn't point out in any way that gun manufacturers or fossil fuel companies have protected status under any of those pieces of federal law.

John Byrne: Right. And if you look at the initial announcement, it says in the intro, that the proposal would codify more than a decade of OCC guidance saying that banks should provide access to services, capital, and credit, based on risk assessment, not broad-based decisions. That hasn't been going on for a decade. That's just not an accurate statement. Given the work we've done in de-risking with the humanitarian world. So that's simply not true. So limiting it to what they focused on, I think is problematic, and they also make the point, the members of the House Financial Services is if you really do care about opening up access, you would make a change in your views on CRA - and I'm no expert in the community reinvestment act, but obviously there's been a lot of political discussion about that.

And even the federal reserve said that they didn't support what the OCC was proposing with CRA and are coming up with their own view. That's a whole separate issue than AML, but I think this goes back to the politicalization, if you will, of issues that should really be based on making a risk assessment - does it fit the business model, can you mitigate the risk, and then you proceed - as opposed to making decisions based on outside interference that tells you that we need to support gun dealers or fossil fuel companies, that sort of thing.

Elliot Berman: Yeah. Yeah, I think that's right. If you're interested in the topic, I recommend that people take a look at the financial service House Financial Services letter. They make some interesting arguments tying in, systemic national security risks o f the use of fossil fuels because of the climate impact, which they make, as the opposition arguments to the idea that people should do things based on risk assessments and then make a decision.

And their point is,  "well, risk assessments have been made about these industries, so why are we pushing them forward?".

John Byrne: And look, we're going a little bit over time, but the other thing I want to say is as the AML reform package or part of the NDAA does pass and get put into law, House Financial Services and Senate banking and other appropriate committees will have oversight on a number of studies and strategies.

And I think it's been clear, at least from my perspective, that Chairwoman Waters, has done a tremendous job in a whole host of areas, but especially in the areas that we focus on in terms of, getting it right and having oversight that has previously been going on, and then this legislation - whether it's beneficial ownership, whether it's de-risking all these issues,  (and this is not a slight at oncentive banking, I think they've also held some very interesting hearings and some overight)  but it's really going to be important as AML professionals to continue to watch what Congress does going forward. Again, studies and surveys and strategies will ultimately potentially come with regulation to stay on top of that. And when people call things out for being political, it's not our job to make that call, but we should be paying attention to that as well.

Elliot Berman: I agree. John, I want to wish you and your family a happy new year. You and I will be back at this next week. and, the plan is to continue through 2021. So lots of interesting things to talk about in the coming year.

John Byrne: Yeah. Happy New Year to you and everybody as well, stay safe. And we're all hoping, praying and meditating on a much better 2021. So take care of yourself.

Elliot Berman: You too. Bye-bye John.