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In what Fed Vice Chair for Supervision Michael Barr called an "unflinching" review of the U.S. central bank's supervision of SVB, the Fed said its oversight of the Santa Clara, California-based bank proved inadequate and that regulatory standards were too low. At the time of its failure, SVB had 31 unaddressed citations on its safety and soundness, triple what its peers in the banking sector had, the report said. Barr said as a consequence of the failure, the central bank will reexamine how it supervises and regulates liquidity risk, beginning with the risks of uninsured deposits. "Contagion from the failure of SVB threatened the ability of a broader range of banks to provide financial services and access to credit for individuals, families, and businesses," Barr said. The Fed is looking at linking executive compensation to fixing problems at banks designated as deficient on management so as to focus executives' attention on those problems, a senior Fed official said in a briefing.

☆ Highlights from the Fed review of SVB oversight
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +2 min

Fed Vice Chair for Supervision Michael Barr called the review "unflinching," describing the U.S. central bank's oversight of the Santa Clara, California-based bank inadequate and regulatory standards too low. * Silicon Valley Bank was "acutely exposed" to risks from rising interest rates and slowing activity in the technology sector in ways that senior leaders and its board of directors did not appreciate. * In 2022, SVB failed to test its capacity to borrow at the discount window and did not have appropriate collateral and operational arrangements in place to obtain contingency funding. * Fed supervisors discussed conducting an interest-rate risk review of SVB during 2022 but decided to prioritize other exams and defer it to the third quarter of 2023. * The level of Fed resources dedicated to its regional bank oversight "proved insufficient."

☆ Red flags galore: Fed officials cited SVB 31 times
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +4 min

June 2022*Oversight of compliance monitoring and testing*Sanctions country of interest risk managementMay 2022*Risk management program: Supervisors found that SVB's risk management program was not effective or comprehensive, and resulted in a reactive approach rather than a holistic approach to risk management and reporting to senior management and the board. *Board effectiveness: The board of SVB did not provide effective oversight of the bank's management, and did not hold senior management accountable for executing a sound risk management program. November 2021* Enhanced liquidity risk management project plan: Fed officials identified weaknesses in the bank's risk management plans and said addressing them "will likely require an accelerated effort." August 2021* Governance process for lending procedures: The Fed found a "critical gap" in underlying documents for SVB's management to implement high-level policy objectives. * Loan risk rating granularity: While the bank's risk ratings were deemed timely and accurate, the system was not "sufficiently granular" for a bank of its size.

☆ US Fed plans broad revamp of bank oversight in wake of SVB collapse
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +7 min

Many commentators linked the lessons learned from the earlier crisis to the ongoing concerns about First Republic Bank. INSTITUTE OF INTERNATIONAL BANKERS CEO BETH ZORC"The IIB commends the Federal Reserve's timeliness of producing its report on SVB. "There are similarities between SVB's situation and what is happening with First Republic Bank: both are affected by the rapid movement of very large sums of money." A potential First Republic Bank failure could similarly present a risk to the long-term investment strategy of high net-worth individuals." "It feels isolated, than the rest of the regional bank system, feels like it's in a different place than where FRC is."

WASHINGTON, April 27 (Reuters) - A federal judge in Texas ordered the head of a South African firm to pay a whopping $3.4 billion for what the U.S. commodities regulator said was its largest-ever fraud case involving bitcoin. Cornelius Johannes Steynberg was ordered to pay $1.7 billion in restitution to victims of the fraud scheme and another $1.7 billion as a civil penalty, a record for any Commodity Futures Trading Commission case, the regulator said in a statement on Thursday. The CFTC charged Steynberg in July, saying Mirror Trading solicited bitcoin online from thousands of people to purportedly operate a commodity pool. The firm claimed to trade off-exchange, retail foreign currency with participants who were not eligible to trade, the regulator said. The default judgment against Steynberg was granted by Judge Lee Yeakel in the Western District of Texas, according to a court filing.

☆ US Treasury's financial crimes unit hits state-chartered trust with penalty
▼ + stars: | 2023-04-26 | by ( ) www.reuters.com time to read: +1 min

April 26 (Reuters) - The U.S. Treasury Department's Financial Crimes Enforcement Network on Wednesday hit a South Dakota-chartered Kingdom Trust Company with a $1.5 million civil penalty for willfully violating a law requiring banks report suspicious transactions. From February 2016 through March 2021, Kingdom Trust processed billions of transactions without proper controls aimed at preventing money laundering, FinCEN said in its consent order. The firm admitted to the willful violations in what FinCEN described in a statement as its first enforcement action against a trust company. Kingdom Trust did not respond immediately to a request for comment. "Kingdom Trust had virtually no process to identify and report suspicious transactions, resulting in it processing over $4 billion in international wires with essentially no controls," FinCEN’s acting director Himamauli Das said in the statement.

☆ U.S. policing AI at companies to make sure it doesn't violate civil rights
▼ + stars: | 2023-04-25 | by ( Chris Prentice | ) www.reuters.com time to read: +1 min

April 25 (Reuters) - U.S. officials on Tuesday warned financial firms and others that use of artificial intelligence (AI) can heighten the risk of bias and civil rights violations, and signaled they are policing marketplaces for such discrimination. Increased reliance on automated systems in sectors including lending, employment and housing threatens to exacerbate discrimination based on race, disabilities and other factors, the heads of the Consumer Financial Protection Bureau, Justice Department's civil rights unit, Federal Trade Commission and others said. "Claims of innovation must not be cover for lawbreaking," Lina Khan, chair of the Federal Trade Commission, told reporters. The Consumer Financial Protection Bureau is trying to reach tech sector whistleblowers to determine where new technologies run afoul of civil rights laws, said Consumer Financial Protection Bureau Director Rohit Chopra. If companies do not even understand the reasons for the decisions their AI is making, they cannot legally use it, Chopra said.

It is considered the first criminal insider trading case involving such assets. "He abused that position of trust," prosecutors said in an April 4 filing. He added that if prosecutors mention insider trading, "there is a substantial danger of undue prejudice and confusion of the jury." "Is it insider trading of anything?" "If this case sticks, there is precedent that insider trading theory can be applied to any asset class."

☆ US watchdog employee sent consumer data to personal email account
▼ + stars: | 2023-04-19 | by ( ) www.reuters.com time to read: +1 min

NEW YORK/WASHINGTON, April 19 (Reuters) - A former employee at the U.S. Consumer Financial Protection Bureau (CFPB) sent confidential records relating to hundreds of thousands of consumers and several financial institutions to their personal email account, the agency said on Wednesday. The person also accessed information including names and transaction-specific account numbers related to about 256,000 consumer accounts at a single institution, it added. The CFPB did not identify the former employee or the institutions involved. A spokesperson for the CFPB said the incident was "completely unacceptable", adding it had been referred to the bureau's internal watchdog. Reporting by Chris Prentice and Douglas Gillison; Editing by Jamie FreedOur Standards: The Thomson Reuters Trust Principles.

SEC Chair Gary Gensler was testifying in front of the House Financial Services Committee for the first time since Republicans took over the House of Representatives in January. Gensler, who has helmed the SEC since April 2021, underscored the agency's rulemaking as "grounded in legal authorities granted by Congress." The SEC also levied record penalties in the last fiscal year and Republican lawmakers seized on the agency's nearly 50 enforcement actions against crypto firms, saying the agency was regulating by enforcement. Gensler maintained most cryptocurrencies are securities and crypto firms must comply with securities laws. Progressive lawmakers and investor advocates have praised the SEC and pushed Congress to give the agency more resources.

☆ Credit Suisse hampered internal probe into Nazi-linked accounts, U.S. senators say
▼ + stars: | 2023-04-18 | by ( Chris Prentice | ) www.reuters.com time to read: +2 min

NEW YORK, April 18 (Reuters) - A committee of U.S. lawmakers on Tuesday said troubled Swiss bank Credit Suisse Group (CSGN.S) hampered a multiyear investigation into the servicing of Nazi clients and Nazi-linked accounts. Credit Suisse commissioned an investigation into allegations levied by a human rights organization that the bank held potential Nazi-linked accounts and failed to disclose them, even during Holocaust-related probes decades earlier. Credit Suisse defended its internal review in a statement, saying that the probe turned up no evidence to support key claims from the Simon Wiesenthal Center that dormant accounts serviced by Credit Suisse held assets from Holocaust victims. A representative for AlixPartners, the consulting firm Credit Suisse hired for the probe, did not respond immediately to a request for comment. His report, which the committee obtained via a subpoena, found many questions were left "unanswered" after Credit Suisse decided to halt the review.

WASHINGTON, April 14 (Reuters) - The Federal Reserve's Board of Governors on Friday said it has approved UBS Group AG's acquisition of the U.S. subsidiaries of Credit Suisse, clearing another major hurdle for the completion of the Swiss-brokered rescue deal. UBS has committed to give the U.S. central bank an implementation plan for combining its U.S. business and operations with those of Credit Suisse within three months of consummating the deal, the Fed's Board said in a statement. UBS agreed to buy Credit Suisse for 3 billion Swiss francs ($3.3 billion), a fraction of its earlier market value. UBS has said it expects the deal to create a business with more than $5 trillion in total invested assets. Under the takeover deal, holders of Credit Suisse AT1 bonds will get nothing, while shareholders, who usually rank below bondholders in compensation terms, will receive $3.23 billion.

[1/2] U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before a House Financial Services and General Government Subcommittee hearing on President Biden's budget request for the Securities and Exchange Commission, on Capitol Hill in Washington, U.S., March 29, 2023. Many in the industry have said existing securities regulations are inappropriate and the sector needs fresh rules. Some DeFi platforms may fall under the proposed definition, but others may already be considered exchanges by the existing one, SEC officials said this week. "Make no mistake: many crypto trading platforms already come under the current definition of an exchange," SEC Chair Gary Gensler said in prepared remarks published on Friday. Most crypto trading platforms meet that definition, regardless of whether they call themselves decentralized, Gensler said.

☆ US SEC sees DeFi platforms as exchanges, seeks more public feedback
▼ + stars: | 2023-04-14 | by ( Chris Prentice | ) www.reuters.com time to read: +3 min

[1/2] U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler testifies before a House Financial Services and General Government Subcommittee hearing on President Biden's budget request for the Securities and Exchange Commission, on Capitol Hill in Washington, U.S., March 29, 2023. The SEC voted 3-2 to take additional comments from the public after crypto firms criticized the plan as vague and aimed at roping in decentralized finance (DeFi) platforms. Some DeFi platforms may fall under the proposed definition, but others may already be considered exchanges by the existing one, SEC officials said this week. "Make no mistake: many crypto trading platforms already come under the current definition of an exchange," SEC Chair Gary Gensler said in prepared remarks published on Friday. Most crypto trading platforms meet that definition, regardless of whether they call themselves decentralized, Gensler said.

☆ Credit Suisse, SEC letters show months-long reporting errors debate
▼ + stars: | 2023-04-11 | by ( Chris Prentice | ) www.reuters.com time to read: +2 min

NEW YORK, April 11 (Reuters) - Credit Suisse and the U.S. Securities and Exchange Commission (SEC) engaged in a months-long debate over the severity of reporting deficiencies that led the Swiss bank to delay its annual report last month. Credit Suisse (CSGN.S) said in March it had postponed the annual filing after a "late call" with the regulator which raised questions about earlier financial statements. Correspondence published in the SEC's online database on Tuesday show that agency staff first raised questions with Credit Suisse officials in July 2022.Credit Suisse and the SEC declined to comment. The last-minute delay concerned analysts and sent Credit Suisse shares to near an all-time low. In the March 10 letter to Joshi, SEC staff acknowledged discussions with the bank on March 8-10.

NEW YORK/WASHINGTON, April 10 (Reuters) - A Goldman Sachs & Co (GS.N) unit has agreed to pay $15 million to settle U.S. Commodity Futures Trading Commission (CFTC) charges that it failed to make proper disclosures and communicate fairly to swap customers, the regulator saidon Monday. In 2015 and 2016, Goldman opportunistically sold clients on so-called "same-day" swaps at times that financially benefited the bank and hurt the customers, the CFTC said in a settled order. The firm did not disclose key marks to customers for assessing the swap's value and did not communicate to them in a fair and balanced manner, the regulator said. By depriving clients of transparency into the relative value of the swaps it was offering, Goldman violated CFTC's business conduct standards for swap dealers, the regulator said. The "CFTC will aggressively pursue swap dealers that violate these business conduct standards" that promote fairness in the swaps market, enforcement director Ian McGinley said in a statement.

☆ U.S. says decentralized finance services being used for illicit transfers
▼ + stars: | 2023-04-06 | by ( ) www.reuters.com time to read: +2 min

WASHINGTON, April 6 (Reuters) - North Korea, cybercriminals, ransomware attackers, thieves and scammers are using decentralized finance (DeFi) services to transfer and launder their illicit proceeds, the U.S. Treasury Department warned on Thursday. In a new illicit finance risk assessment on decentralized finance, the Treasury found that illicit actors are exploiting vulnerabilities in U.S. and foreign anti-money laundering and combating the financing of terrorism (AML/CFT) regulation and enforcement as well the technology underpinning the services. DeFi services that fail to comply with these obligations to prevent money laundering and terrorism financing pose the most significant illicit finance risk in this domain, the assessment found. "Our assessment finds that illicit actors, including criminals, scammers, and North Korean cyber actors are using DeFi services in the process of laundering illicit funds," the Treasury's Under Secretary for Terrorism and Financial Intelligence, Brian Nelson, said in the statement. Nelson added that the private sector should use the findings of the assessment to inform their risk mitigation strategies and to take steps to prevent illicit actors from using decentralized finance services.

☆ Exclusive: Massachusetts regulator probes First Republic insiders' stock sales
▼ + stars: | 2023-03-30 | by ( ) www.reuters.com time to read: +4 min

He is seeking details about the firm's insider trading policies and how officers handled their stock sales from January 1. A spokesperson for First Republic declined to confirm the firm received a subpoena or comment on the stock sales. Silicon Valley Bank and Signature Bank were seized by regulators days later amid liquidity crises, actions that sapped investor confidence in the sector. SHARE SALESSeveral First Republic executives have sold shares this year, including founder and Executive Chairman James Herbert. Herbert and Roffler did not respond to requests for comment on their stock sales or the subpoena.

NEW YORK, March 29 (Reuters) - The U.S. Securities and Exchange Commission (SEC) charged crypto firm Beaxy.com and several executives for registration failures on Wednesday, expanding regulators' push to rein in the industry. That structure, which is common throughout the crypto industry, is one that the SEC's chair has criticized for conflicts of interest and risks to investors. On Monday, the Commodity Futures Trading Commission sued Binance, accusing the world's largest crypto exchange of violating rules preventing illegal activity. The next day, prosecutors in New York added a Chinese bribery charge to their fraud case against Sam Bankman-Fried, who founded the now-bankrupt crypto exchange FTX. Another man, Brian Peterson, was accused of acting as an unregistered dealer by providing marketing services to Beaxy.

Reuters could not determine Coley's status in the government investigations or whether she had cooperated. While he was its director of enforcement, the CFTC increasingly worked on investigations in parallel with federal prosecutors. McDonald's representation of Coley comes as the U.S. investigations pile pressure on Binance, which dominates the crypto sector as the world's largest digital currency exchange. The CFTC's complaint said that Binance personnel, including Zhao, have "dictated Binance.US's corporate strategy, launch, and early operations." In a subpoena addressed to Coley that same month, the SEC also requested all records of her activities and meetings.

Founder Artak Hamazaspyan and a company he controlled, Beaxy Digital Ltd, raised $8 million in an unregistered offering of the Beaxy token (BXY), and Hamazaspyan also misappropriated at least $900,000 for personal use, the SEC said. The regulator also said executives Nicholas Murphy and Randolph Bay Abbott facilitated trading on the Beaxy platform since October 2019 through the company they managed, Windy Inc, the regulator said in a statement. Another executive, Brian Peterson, and his companies provided market making services for the Beaxy platform, acting as unregistered dealers, the SEC said. The other executives and firms, who did not admit or deny the SEC's findings, could not be reached immediately for comment. Reporting by Jonathan Stempel and Chris Prentice; editing by Jonathan OatisOur Standards: The Thomson Reuters Trust Principles.

WASHINGTON, March 27 (Reuters) - A U.S. banking regulator is investigating potential misconduct on the part of executives and others involved in the failures of Silicon Valley Bank and Signature Bank. Gruenberg did not offer further details into who or what may be the subject of probes, which could be one of several under way by the U.S. government. It is common for the government to open probes into such events, and such investigations do not necessarily result in charges of misconduct. But its sudden collapse has also raised questions about what executives knew about the bank's struggles and what they disclosed with investors, the sources said. Reporting by Pete Schroeder and Chris PrenticeOur Standards: The Thomson Reuters Trust Principles.

The CFTC sued Binance, Zhao and its former top compliance executive with "willful evasion" of U.S. law, "while engaging in a calculated strategy of regulatory arbitrage to their commercial benefit." "Upon an initial review, the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint," Zhao said in a statement. Firms such as brokers that facilitate U.S. customers' trading of such products are required to register with the agency. 'PIRATE SHIP'Founded in Shanghai in 2017, Binance sits at the heart of the global crypto industry. With a holding company based in the Cayman Islands, Binance has never revealed the location of its core exchange.

March 27 (Reuters) - Major cryptocurrency exchange Binance and executives, including CEO and founder Changpeng Zhao, have been sued by the U.S. Commodity Futures Trading Commission (CFTC) for regulatory violations, according to a court filing on Monday. Binance's compliance program has been "ineffective" and the firm, under the direction of Zhao, told employees and customers to go around compliance controls, the CFTC said. It also accused Binance's former Chief Compliance Officer Samuel Lim of aiding and abetting Binance's violations. "For years, Binance knew they were violating CFTC rules, working actively to both keep the money flowing and avoid compliance. Its core Binance.com exchange, the world's biggest, processed trades worth about $23 trillion last year, according to data provider CryptoCompare.

WASHINGTON/NEW YORK, March 25 (Reuters) - The banking crisis set off by the swift collapse of Silicon Valley Bank (SIVB.O) has exposed a sharp disconnect between Washington and Wall Street. Some critics are asking whether the Biden administration could have contained the crisis with aggressive actions at the start. FINDING A BUYER FOR SVBThe failure of the nation's 16th largest bank caught regulators off guard. The banking industry itself is not united on how to reassure depositors. The banking industry is searching for sweeping relief to calm markets, while Washington is discussing how to prevent the next crisis.

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