Prepaid cards are increasingly popular—they are frequently used instead of traditional bank accounts to shop, withdraw cash from ATMs, pay for healthcare costs from health savings accounts, distribute natural disaster aid, and pay wages. Read More ›
A Cautionary Tale for Money Service Businesses: How Violating the Bank Secrecy Act Could Cost Millions
On February 27, 2017, The Financial Crimes Enforcement Network (“FinCEN”) fined Merchants Bank of California (“Merchants”) $7 million for what it called “egregious” violations of the Bank Secrecy Act (“BSA”). The Office of the Comptroller of the Currency simultaneously assessed a $1 million civil monetary penalty against Merchants because it violated two previous consent orders. Merchants is a community bank located in Carson City, California. The Bank had a large portfolio of Money Service Businesses (“MSBs”) customers. MSBs are generally recognized by federal regulators to include: (1) currency dealers or exchangers; (2) check cashers; (3) issuers of traveler’s checks, money orders, or stored value; (4) sellers or redeemers of traveler’s checks, money orders, or stored value; and (5) money transmitters. In Merchants’ case, it had 165 check-cashing and 44 money-transmitter customers, who often operated at great distances from the Bank. Compounding the situation was the fact that Bank insiders owned or managed a number of the MSB customers. Read More ›
New Hampshire legislators may exempt people who provide money transfer services for virtual currency, such as bitcoin, from being considered “money transmitters” for the purposes of the state’s licensing requirements. Specifically, the bill, HB436, would amend the definitions section (RSA 399-G:1) and the exemptions (RSA 399-G:3). As modified, the definitions would clearly define what a “virtual currency” is. The amended version would also create a new licensing exemption for “[p]ersons conducting business using transactions conducted in whole or in part in virtual currency.” Read More ›
On September 13, 2016, the New York State Department of Financial Services (“NYDFS”) issued proposed cybersecurity regulations (“Original Proposed Regulations”) that would impose new, stringent cybersecurity requirements on banks, money transmitters, insurance companies, and other financial service providers regulated by the NYDFS (collectively, “Regulated Institutions”). Read More ›
The Office of the Comptroller of the Currency (OCC), a subset of the U.S. Treasury Department, recently announced that it will create a special purpose national bank charter specifically for financial technology (fintech) companies. This announcement comes on the heels of the rapid rise in fintech and in the number of companies that use such technology. An official charter aims to supervise the more than 4,000 fintech companies more closely and provide a framework for new companies to operate in the financial services industry. Read More ›
Medieval kings have something in common with cutting-edge software developers forking new applications off the blockchain. Read More ›
Initial coin offerings (ICOs) are garnering substantial attention as investors hope their digital coins will soon be worth more than gold and software developers envision them as a way to boot-strap financing. Read More ›
It’s EZ as 1, 2, 3 . . . Disclosure, limited liability and periodic statements required for prepaid accounts under the CFPB’s new Prepaid Rule amending Regulations E and Z
The Consumer Financial Protection Bureau (CFPB) recently issued a final rule, the “Prepaid Rule,” amending Regulations E and Z. The Prepaid Rule affects issuers of prepaid personal, household or family accounts by expanding the applicability of Regulations E and Z as of October 1, 2017. It brings “prepaid accounts” into Regulation E’s definition of “account” and broadens the reach of Regulation Z’s overdraft credit features. While this rule applies to digital wallets and P2P payments, the CFPB did not extend this rule to virtual currency. Read More ›
It seems like everyone is discussing “blockchain,” but few have taken the time to really define what blockchain is (and is not). In particular, the federal government has not reached a consensus on what the term should mean. Recently a group of blockchain experts from academia, private practice, and government relations sat down together to do just that—define “blockchain” – at the Blockchain Definition on Capitol Hill event, hosted by MIT Media Lab, Congressman David Schweikert, the Chamber of Digital Commerce, and the DC Blockchain Center. This article shares one definition which was submitted for consideration at the event. Read More ›
Are Prices Free Speech? The Supreme Court is set to weigh in on whether merchant surcharges are protected as free speech
The Supreme Court recently agreed to review a case from the Second Circuit Court of Appeals holding that New York’s anti-surcharge provision was constitutional. Similar cases–with differing outcomes–have been heard in the Fifth and Eleventh Circuits, as well as a District Court in the Ninth Circuit. The issue is this: in each of the states at issue, statutes prohibit “surcharges” but permit discounts to cash purchasers, whether explicitly (California and Florida) or by implication (New York and Texas). For example: Read More ›
Ask the Blogger
Do you have a topic that you would like discussed in a future blog article? Please let us know. If you have a confidential question regarding a blog article, please feel free to contact the article's author directly, or let us know if you would like for someone to contact you directly.
Christopher C. Tieke is an associate in Frost Brown Todd's Louisville office, focusing his practice on business litigation. He graduated from the University of Cincinnati College of Law, with magna cum laude honors; served as an Associate Member of the University of Cincinnati Law Review; and participated in the Entrepreneurship and Community Development Clinic.