2022: Top five regulations and fines
As 2022 draws to a close, FinTech Futures takes a look back at some of the year’s top regulatory moves in the financial and technology space.
As more and more people gain access to financial services, and new ways to pay, amass wealth and bank come to the fore, regulators have been busy in 2022 protecting consumers and reining in wayward financial institutions.
Here are five of the top regulatory stories across 2022.
FCA kickstarts discussion on Big Tech’s impact on competition
FCA kickstarts Big Tech discussion on competition
In November, the UK’s Financial Conduct Authority (FCA) tendered a discussion around the impact of Big Tech firms on competition within the UK’s financial services sector.
The regulator said Big Tech firms, usually referring to Facebook (Meta), Google (Alphabet), Apple and Amazon, have seen their presence in UK financial services markets grow in recent years, and they have the potential to change market outcomes quickly.
Kickstarting the discussion, the FCA published analysis focusing on Big Tech’s entry in four “vital” retail sectors: payments, deposit taking, consumer credit and insurance.
The analysis highlighted five key themes emerging across the four retail sectors: the potential for Big Tech firms to enhance the value of their ecosystems; a partnership model is likely to continue the dominant entry strategy for Big Tech firms; Big Tech firms’ entry may not be “sequential or predictable”; Big Tech firms’ entry in financial services could benefit many consumers; and that there is a risk that the competition benefits from Big Tech’s entry in financial services could be eroded if these firms can create and exploit entrenched market power.
While no regulatory changes are being proposed, the FCA said Big Tech firms could pose competition risks if they rapidly gain market share, and they are able to exploit market power.
Kim Kardashian hit with $1.26m SEC fine for crypto promotion violations
Celebrity influencer Kim Kardashian was fined $1.26 million by the US Securities and Exchange Commission (SEC) for violating the anti-touting provision of the US federal securities laws.
The SEC said Kardashian was paid $250,000 to publish a post on her Instagram account about EMAX tokens, a crypto asset being offered by EthereumMax, but failed to disclose the payment she received for the promotion. The post contained a link to the firm’s website, where potential investors could purchase EMAX tokens.
Gurbir Grewal, director of the SEC’s division of enforcement, said: “The federal securities laws are clear that any celebrity or other individual who promotes a crypto asset security must disclose the nature, source and amount of compensation they received in exchange for the promotion.”
Without admitting or denying the SEC’s findings, Kardashian agreed to pay the aforementioned $1.26 million, including approximately $260,000 in disgorgement, which represents her promotional payment, plus prejudgment interest, as well as a $1,000,000 penalty.
Kardashian also agreed to not promote any crypto asset securities for three years.
UN calls for comprehensive crypto regulation in developing countries
UNCTAD outlines “risks and costs” of crypto to developing nations
The United Nations Conference on Trade and Development (UNCTAD) outlined the “risks and costs” of cryptocurrencies to developing nations in three policy briefs, suggesting ways to limit their expansion.
The UNCTAD, which promotes the interests of developing states in world trade, detailed how crypto is a potential threat to financial stability, the allocation of capital and resources and the security of monetary systems within developing countries.
Citizens of emerging nations, such as Kenya, Venezuela and India, are disproportionately more likely to own digital currency, the UNCTAD said, with 15 of the top 20 countries with the highest share of digital asset ownership being emerging countries.
It called on developing nations to curb crypto advertising and introduce robust regulation of crypto exchanges, digital wallets and other aspects of decentralised finance. It also suggested banning financial institutions from holding crypto.
It said developing nations should also rethink their capital controls to take account of the “decentralised, borderless and pseudonymous” nature of crypto.
On an international level, the UNCTAD recommended implementing a global tax framework regarding crypto tax, regulation and information sharing.
The organisation said cryptoisation, the process by which crypto unofficially replaces domestic currencies, can “jeopardise the monetary sovereignty of countries”.
US regulators fine Bank of America $225m for “botched disbursement” of unemployment benefits
The Consumer Financial Protection Bureau (CFPB) fined Bank of America (BoA) $100 million for “botching” the disbursement of state unemployment benefits at the height of the pandemic.
“Bank of America automatically and unlawfully froze people’s accounts with a faulty fraud detection program, and then gave them little recourse when there was, in fact, no fraud,” the CFPB said.
“Taxpayers relied on banks to distribute needed funds to families and small businesses to rescue the economy from collapse when the pandemic hit,” said CFPB director Rohit Chopra.
“Bank of America failed to live up to its legal obligations. And when it got overwhelmed, instead of stepping up, it stepped back.”
The CFPB added that during its investigation, it found that Bank of America engaged in “unfair and abusive acts and practices” which led to Californians not getting their unemployment benefits during the pandemic.
USAA hit with $140m fine from FinCEN for Bank Secrecy Act violations
FINCEN slaps USAA Federal Savings Bank with $140m fine
USAA Federal Savings Bank (USAA FSB) was hit with a $140 million civil money penalty by the US Financial Crimes Enforcement Network (FinCEN) for what it referred to as “wilful violations” of the Bank Secrecy Act (BSA).
FinCEN said the US financial services firm admitted that it failed to implement and maintain an anti-money laundering (AML) programme that met the minimum requirements of the BSA from at least January 2016 through to April 2021.
USAA FSB also admitted to failing to accurately report in a timely manner thousands of suspicious transactions to FinCEN, “resulting in millions of dollars in suspicious transactions flowing through the US financial system without appropriate reporting”.
FinCEN said this included customers using personal accounts for alleged criminal activity.
“As its customer base and revenue grew in recent years, USAA FSB wilfully failed to ensure that its compliance programme kept pace,” said FinCEN’s acting director Himamauli Das.
