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Published By:SNL Financial

Washington Wrap: Goldman Sachs under review over Panama Papers

New York's Department of Financial Services is seeking information from Goldman Sachs Group Inc., BNP Paribas SA, Canadian Imperial Bank of Commerce and Standard Chartered Plc on shell companies established through a law firm in Panama, Bloomberg News reported Wednesday. The investigation came after the Panama Papers leak about global banks using law firm Moasack Fonseca & Co. to set up anonymous shell companies. The data behind the leaks was made public this week by the International Consortium of Investigative Journalists.

The massive leak put a spotlight on the possible use of shell companies for tax evasion and other purposes. The White House's Office of Management and Budget accepted the final review of a FinCEN Treasury rule last month that would require banks to identify owners of shell companies.

Rick Aragon, AML compliance manager at LexisNexis Risk Solutions, said in an interview that the rule will increase compliance costs and complexity for banks. The new obligation for banks to identify and verify beneficial owners will affect system processes and could ultimately impact the risk profile of banks, he said.

"There's all sorts of different downstream processes that are going to be impacted by this," he said.

While offshore accounts are already considered high-risk, the publicity of the accounts will cause banks to re-evaluate whether or not they want to take on this type of business, he added.

The House Science, Space, and Technology's Oversight Subcommittee is investigating the FDIC's slowness to report data breaches that were later deemed as posing a major cybersercurity risk. The FDIC has reported seven security breaches since October 2015, all related to employees leaving the agency and downloading data on personal external devices. Lawrence Gross, chief information officer and chief privacy officer at the FDIC, testified at a May 12 hearing that the agency has taken steps to mitigate further breaches, but Rep. Barry Loudermilk, R-Ga., said he does not think the agency is taking the breaches seriously.

Democratic presidential candidate Hilary Clinton said she supports increasing diversity at the Federal Reserve and removing bankers from the board of directors, The Washington Post reported Thursday. Her comments were made in response to a letter from 127 legislators, including Elizabeth Warren and Bernie Sanders, asking Chair Janet Yellen to improve leadership diversity. "As the Board of Governors embarks on its search for regional bank directors to serve beginning in 2017, and as you consider future regional president vacancies, we urge you to engage in an inclusive process to consider candidates from a diverse set of backgrounds, including a greater number of African-Americans, Latinos, Asian Pacific Americans, women, and individuals from labor, consumer, and community organizations," the lawmakers wrote. The group cited a Center for Popular Democracy study that found 83% of Fed head office board members are white and three-fourths of regional bank directors are male.


The argument between JPMorgan Chase & Co. Chairman, President and CEO Jamie Dimon and Independent Community Bankers of America President Camden Fine heated up this week after Dimon called Fine a "jerk" on CNBC. Fine retorted that Dimon's language was that of a junior high-schooler.

Dimon's comments were made in response to statement Fine made April 9. "Just because Jamie Dimon says 'let's sing kumbaya' doesn't mean community banks are going to just line-up like a Greek chorus," Fine said in response to an op-ed Dimon wrote, calling banks of all sizes to unite.


The Office of Financial Research outlined best practices for data collection by regulators, including the agencies composing the Financial Stability Oversight Council. Among common pitfalls it pointed out in regulatory data collection were a failure to use existing industry standards, missing or incomplete data requirements, inadequate instructions and preparation, and a lack of resources to support institutions reporting the data.

The OFR suggested more collaboration among data collectors and noted that regulators' collection processes should be designed to be comprehensive and attentive to detail while also having a foundation of simplicity.

The OFR also released a study in which it compared the reported credit standards in the Fed's senior loan officer opinion survey to Home Mortgage Disclosure Act data. It found that the survey results have "the expected relationships" with actual denial rates at banks and economic conditions such as delinquency rates and home prices in MSAs where credit tightening occurs.

The House Financial Services Committee could soon introduce a bill that would provide regulatory relief for community banks if they meet a certain capital threshold. Rep. Steve Stivers, R-Ohio, said in an interview Wednesday that the bill would also include a dual mandate for the Consumer Financial Protection Bureau to protect consumers and encourage access to credit.

The Treasury Department wants to work with Congress to pass legislation overseeing and providing protection for borrowers in the marketplace lending industry. In a white paper reviewing the industry, the Treasury stated that to ensure market soundness prudent loan underwriting, securitization transaction pricing, and robust governance and disclosures are necessary. The paper also recommended that online lenders should promote a transparent marketplace for borrowers and investors, ensure safe and affordable credit through partnerships, and support robust and effective oversight.

By Moriah Costa