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Tag Archive for: Legal Q & A

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Compliance

Navigating Wisconsin’s Marital Property Act

WBA’s top marital property questions

The Wisconsin Marital Property Act presents unique community property considerations for Wisconsin banks. While nothing has changed in this area of law, its nature gives rise to some frequently asked questions. Below are two of the most commonly received questions through the Wisconsin Bankers Association’s (WBA) Legal Hotline.

Question 1: Is a bank permitted to pull credit on a non-signing spouse?

Answer 1: Yes. When dealing with married Wisconsin residents, a bank is permitted to pull credit on a non-signing spouse and may even be required to do so.

Wisconsin Section 766.56(1) requires creditors to consider all marital property available to satisfy the debt when evaluating a married Wisconsin resident’s application for family purpose credit. Where there is an obligation in the interest of the marriage or family, being a “family purpose” obligation, the creditor must consider all marital property available to satisfy the obligation in the same manner that it considers the availability of property of an unmarried applicant. While the law does not define “family purpose,” the presumption is that an obligation incurred by a spouse during marriage is family purpose. Additionally, income would be presumed to be marital property unless there is a marital property agreement indicating otherwise. Because the Wisconsin Marital Property Act requires creditors to consider all marital property available to satisfy the debt, a bank may be required to do so.

Regulation B Section 1002.5(c)(2) allows the bank to request information about the applicant’s spouse if the applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested. As Wisconsin is a community property state, banks are permitted to pull credit on a non-signing spouse.

Question 2: How does the Homestead Rule Affect Mortgages for Married Wisconsin Residents?

Answer 2: Wis. Stat. Section 706.02(1)(f) requires that each spouse with homestead rights must sign the mortgage for it to be valid unless an exception applies. In this context, homestead means the dwelling, and so much of the land surrounding it as is reasonably necessary for use of the dwelling as a home, but not less than one-fourth acre, if available, and not exceeding 40 acres. It is WBA’s understanding that title companies are typically able to provide an indication of whether the property would be considered a homestead under this definition.

Once a bank has determined the pledged property as a homestead, the bank must consider Section 706.02(1)(f). If the mortgage alienates any interest of a married person in a homestead, then each married individual must sign the mortgage in order for it to be valid. The only exceptions to this rule are for conveyances between spouses and for purchase-money mortgages.

Question 3: What is a “Marital Purpose Statement?”

Answer 3: Many software platforms will provide what is called a “marital purpose statement” or otherwise incorporate some type of statement to the fact that an application for a loan is in the interest of the marriage or family. While the use of such a statement depends on the specific statement produced by bank’s software system as well as policy and procedure, there are some general concepts under Wisconsin’s Marital Property Act which help in understanding it.

Per Wis. Stat. section 766.55, an obligation incurred by a spouse during marriage is presumed to be incurred in the interest of the marriage or the family and a statement separately signed by the obligated or incurring spouse at or before the time the obligation is incurred stating that the obligation is or will be incurred in the interest of the marriage or the family is conclusive evidence that the obligation to which the statement refers is an obligation in the interest of the marriage or family.

Because the separately signed marital purpose statement provides conclusive evidence of this fact, WBA generally recommends that when bank is extending credit to a married Wisconsin resident, whether solely or joint credit, that bank should obtain this statement.

Without having such separately signed statement, if the loan were to go into default and bank is seeking to collect against marital assets, bank must first prove that the debt was marital obligation, incurred in the interest of the marriage or family — by bank having such separately signed statement, it is conclusive evidence for the bank to prove this fact.

Question 4: What are the Wisconsin “Tattletale Notice” Requirements?

Answer 4: Wis. Stat. section 766.56(3)(b) requires certain notices be provided to a borrower’s spouse for loans governed by the Wisconsin Consumer Act involving marital property.

More specifically, the requirements apply when a creditor extends credit to a spouse in a credit transaction governed by chs. 421 to 427 and the extension of credit may result in an obligation described under s. 766.55(2)(b). In this, “Tattletale Notices” apply to transactions governed by the Wisconsin Consumer Act, and an obligation incurred by a spouse in the interest of the marriage or the family. A loan transaction that is governed by the Wisconsin Consumer Act is one that is: (1) consumer, family or household purpose; (2) $25,000 or less; and (3) not secured by first lien or equivalent security interest in the borrower’s principal residence.

In such a situation, the lender must provide a copy of the instrument, document, agreement, or contract evidencing the obligation to pay or any required credit disclosure which is given to the applicant spouse, or by providing a separate writing briefly describing the nature of the credit extended.

Question 5: What is a “Spousal Consent to Guaranty?”

Answer 5: Some software providers may make available a spousal consent to guaranty form. For example, WBA and FIPCO have a form created to protect the creditor’s ability to collect on the guaranty from all marital property belonging to the couple. This form is based upon the fact that the Wisconsin Marital Property Act generally limits gifts of marital property to third parties by one spouse acting alone to $1,000 per calendar year unless the spouses act together in making the gift (See: Wis. Stat. Section 766.53.)

While WBA does not necessarily view payments on guaranties as gifts to the third party, in the event a court characterized the payment as a gift, by obtaining the non-guarantor spouse’s consent to the guaranty, the creditor would then not be limited to the $1,000 per calendar year amount.

Additionally, while spouses may act together to make a gift, WBA strongly cautions against requiring the signature of a guarantor’s spouse on the loan. Regulation B prohibits a creditor from requiring the signature of a guarantor’s spouse just as it prohibits requiring the signature of an applicant’s spouse. Thus, a creditor cannot require the guarantor’s spouse to sign the guaranty to protect its interest. Instead, the creditor should obtain the non-guarantor spouse’s consent to the guaranty by execution of a form such as the one described above.

Question 6: What is a “Spousal Consent to UCC Filing?”

Answer 6: The Uniform Commercial Code (UCC) provides rules for perfecting of security agreements. One method of perfecting a security agreement is through the filing of a financing statement. However, as a general matter of the UCC, a creditor can only file a financing statement if authorized by the debtor. In the event that a creditor — such as a bank — does not have such authorization, the filing is not valid, and bank could be penalized. Debtor means a person having an interest in the collateral. Generally, this is a borrower — but it could be a third-party pledgor or include non-signing spouse as well.

Authorization is given when signing the security agreement. Thus, a debtor does not need to give separate authorization because they will sign the security agreement. If the spouse is a “debtor,” and also signs the security agreement, then they have also given authorization and separate authorization is also not necessary. However, if the spouse is a “debtor” and does not sign the security agreement, then separate authorization is required, so the consent is required. In this situation, many software platforms will provide a means to accomplish this through a form such as a “spousal consent to UCC filing/financing statement.”

If you have any additional questions regarding Wisconsin’s Marital Property Act, or any other legal question, please contact WBA’s legal team.

June 30, 2023/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2023/06/Legal-scaled.jpeg 1707 2560 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2023-06-30 11:34:482023-06-30 11:34:48Navigating Wisconsin’s Marital Property Act
Compliance, Resources

Legal Q&A: Name and Signature Inconsistency in Documentation

Banks should consider document type, purpose, relevant issues

By Scott Birrenkott

Q: What name should banks use for customers when completing documents?

A: The name that should appear, and be signed, on documents depends on a few things. Primarily, the type of documents being signed, the purpose for which the customer’s name is appearing, and any relevant rules.

Typically, a customer has a single, consistent name which will appear on documents, disclosures, and other communications and match their signature. However, there are situations where this is not the case. A customer might use inconsistent capitalization, or go by different names, such as a “nickname,” or perhaps use their middle initial in some situations, or a “Jr.” or “Sr.” designation. There may also be situations where a customer changes their name, either because of a marriage, or other situation — such as a change in identity or gender transition — and a change from an individual’s “deadname.”

Banks should consider how various types of documentation can be affected. For example, if opening a checking account, the specimen signature is important to verifying transactions on the account. If a customer provides a specimen signature which does not match the signature they intend to use on checks, that can result in a question as to whether certain items are authorized. For this reason, the signature card should match the name the customer intends to use when authorizing transactions and should be updated if a change occurs.

When entering into a contract, best practice would be using the customer’s legal name, as provided by customer. The customer should sign in a manner by which they intend to be bound. There are no specific standards for a signature, other than that it reflects the party’s intent to be bound. For example, a customer might sign in a manner different from the way their name otherwise appears on documentation, such as whether they use a middle initial in their signature or not. Or how they capitalize their signature, or whether they are able to sign their name at all and perhaps can only make a mark or symbol such as a checkmark or “X.”

Banks must consider whether the documents properly identify its customer, and whether the signature affixed to the document reflects a valid contract. In this regard, it is ultimately a matter of policy and preference, but a best practice recommendation would be for the bank to be consistent in how the name appears throughout all the documentation, and the signature itself.

However, when it comes to Uniform Commercial Code (UCC) financing statements, there are specific rules which must be followed. This article does not delve into the specifics, but banks should consider that for filing UCC financing statements, the filing should reflect the debtor’s exact name as required by Wis. Stat. section 409.503.

For any questions regarding customer names, accuracy of UCC financing statements, or other topics, contact WBA legal. Additional compliance resources can be found at wisbank.com/resources/compliance.

February 13, 2023/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Triangle-Backgrounds_Light-Blue-on-Green.jpg 972 1920 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2023-02-13 08:00:132023-02-13 08:00:13Legal Q&A: Name and Signature Inconsistency in Documentation
Compliance, Resources

Legal Q&A: Name and Signature Inconsistency in Documentation

Banks should consider document type, purpose, relevant issues

By Scott Birrenkott

Q: What Name Should Banks Use for Customers When Completing Documents?

A: The name that should appear, and be signed, on documents depends on a few things. Primarily, the type of documents being signed, the purpose for which the customer’s name is appearing, and any relevant rules.

Typically, a customer has a single, consistent name which will appear on documents, disclosures, and other communications and match their signature. However, there are scenarios where this is not the case. A customer might use inconsistent capitalization, or go by different names, such as a “nickname,” or perhaps use their middle initial in some situations, or a “Jr.” or “Sr.” designation. There may also be situations where a customer changes their name, either because of a marriage, or other situation — such as a change in identity or gender transition — and a change from an individual’s “deadname.”

Banks should consider how various types of documentation can be affected. For example, if opening a checking account, the specimen signature is important to verifying transactions on the account. If a customer provides a specimen signature which does not match the signature they intend to use on checks, that can result in a question as to whether certain items are authorized. For this reason, the signature card should match the name the customer intends to use when authorizing transactions and should be updated if a change occurs.

When entering into a contract, best practice would be using the customer’s legal name, as provided by customer. The customer should sign in a manner by which they intend to be bound. There are no specific standards for a signature, other than that it reflects the party’s intent to be bound. For example, a customer might sign in a manner different from the way their name otherwise appears on documentation, such as whether they use a middle initial in their signature or not. Or how they capitalize their signature, or whether they are able to sign their name at all and perhaps can only make a mark or symbol such as a checkmark or “X.”

Banks must consider whether the documents properly identify its customer, and whether the signature affixed to the document reflects a valid contract. In this regard, it is ultimately a matter of policy and preference, but a best practice recommendation would be for the bank to be consistent in how the name appears throughout all the documentation, and the signature itself.

However, when it comes to Uniform Commercial Code (UCC) financing statements, there are specific rules which must be followed. This article does not delve into the specifics, but banks should consider that for filing UCC financing statements, the filing should reflect the debtor’s exact name as required by Wis. Stat. section 409.503.

For any questions regarding customer names, accuracy of UCC financing statements, or other topics, contact WBA legal. Additional compliance resources can be found at wisbank.com/resources/compliance.

January 3, 2023/by Jaclyn Lindquist
https://www.wisbank.com/wp-content/uploads/2021/09/Untitled-3_Lime-Green.jpg 972 1920 Jaclyn Lindquist https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Jaclyn Lindquist2023-01-03 17:19:302023-01-04 09:09:16Legal Q&A: Name and Signature Inconsistency in Documentation
Compliance, Resources

Legal Q&A: Managing Online Stop Payment Orders

Ensuring satisfactory written instruction for electronic payments

By Scott Birrenkott

Q: Can a Stop Payment Order for a Check Be Made Electronically?

A: Yes. An electronic stop payment order can be given for a check electronically and would be effective for six months.

Wisconsin Statute section 404.403 provides that a stop payment may be given by an order to the bank describing the item with reasonable certainty received at a time and in a manner that affords the bank a reasonable opportunity to act on the stop payment request. This order may be made orally or in writing. The statute provides that if the order is oral and not confirmed in writing, it is valid for 14 days. A written order is valid for six months, and the oral order must be confirmed in writing (before the end of the 14-day period) for it to be extended to six months.

The rule does not discuss online stop payment orders, nor have the courts yet interpreted whether an electronic stop payment is oral or in writing. For example, a stop payment made online, through bank’s website platform, or mobile application. However, it is WBA’s understanding that such an electronic stop payment would be considered “in writing” and thus, effective for six months.

As stated, the statute provides that a stop payment may be given by an “order.” The Uniform Commercial Code (UCC) defines an order as “a written instruction to pay money signed by the person giving the instruction,” establishing that an order must be written and must be signed. The UCC further provides that a writing “includes printing, typewriting, or any other intentional reduction to tangible form.” Although the UCC’s definition does not include “electronic,” or other such means, WBA believes that a valid argument exists that an electronic file can be reduced to a tangible form by printing the document. For example, electronic writings have been held to satisfy the writing requirement of the statute of frauds. Furthermore, The UCC defines “signed” as “any symbol executed or adopted with present intention to adopt or accept a writing.”

For the above reasons, it is WBA’s understanding that an electronic stop payment order would satisfy the writing requirement of the UCC. Banks offering the ability to issue an electronic stop payment should confirm the methods for doing so in accordance with the discussion above, to determine whether it aligns with this rationale.

For any questions regarding stop payments, or other topics, please contact WBA legal. Additional compliance resources can be found on the WBA website: wisbank.com/resources/compliance.

December 8, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Untitled-3_Lime-Green.jpg 972 1920 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-12-08 07:57:242022-12-08 07:57:32Legal Q&A: Managing Online Stop Payment Orders
Compliance, Resources

Legal Q&A: New Compliance Resources Now Available

Help your team make the most of WBA’s robust online resources

By Scott Birrenkott

Q: Does WBA Have New Resources Available for Compliance Officers?

A: Yes. WBA recently added new, updated resources to its website.

WBA continues to add to its new website — one such section recently updated was the Compliance Resources page. The Compliance Resources page can be found by visiting wisbank.com/resources/compliance or by navigating from the home page to the News and Resources tab found in the top menu, scrolling down, and looking for the red button under the heading Don’t Face Changes Alone.

On this section of the website, bankers will find previously listed resources such as the most recent WBA Compliance Journal, the comment letter library, links to Wisconsin laws, various compliance toolkits, and a number of new resources. New sections and resources include a monthly FAQ, a recently released resources section, most frequently requested resources, popular legal Q&As, and a new video series called the “WBA Compliance Corner.”

These resources will be updated and refreshed frequently as well as discuss hot topics, recently issued rulemakings, and commonly faced situations.

For example, the monthly FAQ is taken from questions received through the WBA legal call program to provide an answer to the most frequently asked question by Wisconsin bankers each month. The recently released resources section provides WBA’s newest creations — such as a flowchart for Wisconsin’s newly Revised Uniform Unclaimed Property Act. The most frequently requested resources section compiles some of the most useful guides and articles. The popular legal Q&As includes answers to the most frequently asked questions, and common scenarios bankers are likely to encounter. Lastly, the WBA Compliance Corner is a brand-new, monthly video series designed to provide the most recent compliance news in a concise presentation of 30–40 minutes, along with links to applicable material.

WBA hopes compliance staff and others interested in these resources find them useful. Additionally, while not new, WBA of course still maintains the legal call program. Certainly do not hesitate to contact WBA legal at wbalegal@wisbank.com or 608-441-1200.

October 4, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Triangle-Backgrounds_Yellow-on-Light-Blue.jpg 972 1921 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-10-04 14:47:542023-05-16 13:01:56Legal Q&A: New Compliance Resources Now Available
Compliance

Legal Q&A: How Should Your Bank Approach Contracting With Minors?

Bank policies, procedures assist in determining the risk associated with minors

By Scott Birrenkott

Q: Can Banks Contract with Minors

A: Yes, depending on policies and procedures.

WBA frequently receives questions regarding the ability of minors to enter into a contract. No rule or regulation prohibits a bank from contracting with a minor. However, a minor can escape liability under the contract. Meaning, a minor could avoid liability from a bank seeking to hold a minor accountable for terms under the contract. Thus, banks are free to enter into contracts with minors, but must decide so as a matter of risk.

The ability of a minor to escape liability or void a contract is often referred to as the doctrine of incapacity. This is a common law term, meaning, generally, a concept under the law that is derived from judicial precedent rather than statute. As such, there is no specific rule governing contracting with a minor. It also means that there is no specific point at which a minor is deemed “competent.” If a minor attempts to escape liability under contract, it would be up to the bank to attempt to enforce the contract against the minor, and up to a court to decide.

It is important to understand the theory behind the doctrine of incapacity. Generally speaking, the theory is that a minor has not developed enough to understand the significance of contracting and thus may potentially escape liability. Because it is not readily defined, a court could find that someone who has attained the age of 18, or older, still hasn’t matured enough to understand that significance and might be permitted to void the contract.

When it comes to minor accounts, WBA generally recommends that banks consider the use of a WUTMA account. A WUTMA account is created under Wisconsin’s Uniform Transfers to Minors Act, which provides certain requirements, procedures, and responsibilities. Thus, it creates a means for a bank to open an account with an understanding of what rules apply to the relationship between the minor, the adult custodian, and the bank. While WUTMA provides for this certainty, banks should be careful before opening custodial accounts that are not governed by WUTMA, as it would leave questions as to how the account would be handled.

As a result, banks must decide, as a matter of business and policy, whether they are willing to contract with minors. This includes both deposit and loan account relationships. For the above reasons, financial institutions should consult with their policies and procedures regarding contracting with minors.

For any questions on this, or other matters, you may reach WBA legal at wbalegal@wisbank.com or 608-441-1200.

September 22, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Untitled-3_Lime-Green.jpg 972 1920 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-09-22 07:30:472022-09-22 07:30:47Legal Q&A: How Should Your Bank Approach Contracting With Minors?
Compliance

Legal Q&A: Revised Flood Q&As Provide Banks with Expanded, Organized Resource

By Scott Birrenkott

Q: Have the Agencies Finalized Their Revised Flood Q&As?

A: Yes. The OCC, FRB, FDIC, FCA, and NUCA (agencies) have reorganized, revised, and expanded the Interagency Questions and Answers Regarding Flood Insurance (Revised Flood Q&A).

Flood matters continue to be a hot topic with the examiners, and the Revised Flood Q&As are a helpful tool in working through many of the issues associated with flood compliance. The agencies previously issued flood interpretations, but those resources were scattered and found within various guidance documents such as the 2009 and 2011 Q&As. The Revised Flood Q&As supersede and replace those resources by consolidating and updating them into a single document.

The Revised Flood Q&As are organized by category and broken down into numerical designations within their categories. The agencies plan to update and manage these categories accordingly in the future. As an example of the benefit of the Revised Flood Q&As, examiners have recently been reviewing cross-collateralization and contents coverage calculations. The new category labeled “Other Security Interests” includes helpful discussion regarding such matters. For example, “Other Security Interests 7” discusses when flood insurance is required on contents, including examples of how to calculate. Question 8 then discusses a situation in which the contents might be located in another building, and question 9 covers applicability to contents taken as an “abundance of caution.” WBA has recently received questions regarding when contents coverage is required, as well as how to calculate insurable value when contents is included. These updated Q&As are helpful in understanding how the regulators view such situations.

While the flood rules themselves have not changed, the Revised Flood Q&As have been updated for ease of use and remain an excellent resource to consult when faced with a flood question. For any questions on flood matters or other compliance, also consider reaching out to WBA legal at wbalegal@wisbank.com or 608-441-1200.

July 11, 2022/by Jaclyn Lindquist
https://www.wisbank.com/wp-content/uploads/2021/09/Untitled-3_Lime-Green.jpg 972 1920 Jaclyn Lindquist https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Jaclyn Lindquist2022-07-11 08:15:522022-07-11 15:41:01Legal Q&A: Revised Flood Q&As Provide Banks with Expanded, Organized Resource
Bank sign
Compliance

Legal Q&A: Maintaining Campaign and Election-Related Accounts

By Scott Birrenkott

Q: Can a Customer Open a Campaign Finance Account?

A: Yes. Customers may seek to open campaign accounts, political action accounts, conduit funds, and other types of election-related accounts.

Because there is no list of specific documentation that banks must collect for such accounts, banks receiving requests to open these accounts will need to consider what should be collected based upon policy and procedure. As there can be many types of campaign and election-related accounts, there is no one-size-fits-all approach. Banks will need to have a conversation with their customers to better understand the nature of the account requested. This article will use a state-related campaign as an example to illustrate an approach bank might take.

State-related campaigns must follow Wisconsin campaign and election laws. For example, a customer might run for mayor, or sheriff, and seek an account to maintain their campaign funding. The documentation the customer might have, and what documentation the bank might collect from the customer depends upon how the customer is holding funds, making contributions, disbursements, and fundraising. For this reason, the bank should consider having a conversation with the customer to better understand the campaign and use that information to gather any supporting documentation for confirmation of those details.

Bankers might also consider familiarizing themselves with the election process. Particularly if these accounts become common. It is not necessary to become an expert on Wisconsin campaign finance law, but familiarization with the process will go a long way in facilitating easier conversations with customers, knowing the right questions to ask, and to better request relevant information to maintain the account. For example, restrictions or reporting requirements might apply, depending on the campaign. While such requirements are generally the duty of a campaign’s treasurer to follow, from a “know-your-customer” perspective it is worth the bank taking the time to understand these details.

An example account title for such an account would be: John Doe for Sheriff by Jane Doe as Treasurer.

The law of campaign finance is complex. Furthermore, a customer might seek to open an account different than that used in the example above (ex: PAC, conduit, or federal election). Based upon this complexity and variety, a financial institution should also consider seeking assistance from its legal counsel in opening and maintaining such accounts.

June 23, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/10/istock-468491886-bank-banner.jpg 1162 1743 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-06-23 07:36:202022-06-23 07:36:20Legal Q&A: Maintaining Campaign and Election-Related Accounts
Bitcoin lying on table
Compliance

Legal Q&A: Requirements For Reporting Activities Related to Cryptocurrencies

FDIC-supervised banks must now report digital asset ventures

By Scott Birrenkott

Q: Is a Financial Institution Required to Notify Its Regulator When Engaging in Activities Involving Crypto Assets?

A: Yes. FDIC-supervised institutions are required to provide notification, along with certain information, when engaged in any activities involving crypto assets (digital assets). In turn, the FDIC reviews this information to provide relevant supervisory feedback.

While this requirement applies to FDIC-supervised institutions, non-FDIC supervised institutions should still consider proactively working with their prudential federal regulator. As innovations in the space of digital assets continue to develop, and financial institutions explore new relationships, working directly with your regulator is an important step to understanding compliance expectations. Digital assets present potentially unique safety and soundness risks, as well as financial stability concerns, and consumer protection considerations. The FDIC intends to review information provided in order to work with the financial institution engaged in digital asset activities as appropriate.

Wisconsin Department of Financial Institutions (DFI) is also considering digital asset activity. While there are currently no specific Wisconsin requirements or notification requirements, Wisconsin financial institutions should still consider working proactively with the DFI when engaged in digital assets. While both state and federal regulators support innovations, this is an area that is rapidly evolving, and often misunderstood. Transparent communications between financial institutions and their regulators can help address any potential compliance or safety and soundness concerns.

The new FDIC notice requirements can be found under Section 39 of the Federal Deposit Insurance Act, 12 CFR Part 364.

May 3, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/10/bigstock-bitcoin-business-crypto-curre-385540088-scaled.jpg 1707 2560 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-05-03 07:55:262022-05-03 07:55:26Legal Q&A: Requirements For Reporting Activities Related to Cryptocurrencies
Compliance

Legal Q&A: Procedures for Information Sharing

How your bank can prevent financial crimes

By Scott Birrenkott

Q: What Tools are Available to Banks to Help Deter Financial Crimes?

A: Part of Bank Secrecy Act (BSA) regulations establish procedures for information sharing to deter money laundering and terrorist activity.

As financial institutions continue to monitor Office of Foreign Assets Control (OFAC) lists regarding sanctions and other restrictions, don’t forget to monitor for information sharing requests through Section 314 of the USA PATRIOT Act. Pursuant to section 314(a) law enforcement agencies may request that the Financial Crimes Enforcement Network (FinCEN) solicit, on its behalf, certain information from financial institutions.

Upon receiving an information request, a financial institution must conduct a one-time search of its records to identify accounts or transactions of a named suspect. Generally, financial institutions must search records for current accounts, accounts maintained during the preceding 12 months, and transactions conducted outside of an account by or on behalf
of a named suspect during the preceding six months. If a financial institution identifies any account or transaction, it must report to FinCEN that it has a match. No details should be provided to FinCEN other than the fact that the financial institution has a match. A negative response is not required. Unless otherwise provided, the search and response must be conducted within 14 days.

Financial institutions should also consider that FinCEN issued an alert on March 7 to be vigilant against efforts to evade the expansive sanctions and other U.S.-imposed restrictions implemented in connection with the Russian Federation’s further invasion of Ukraine. The advisory warns of evasion attempts and that “sanctioned Russian and Belarusian actors may seek to evade sanctions through various means, including through non-sanctioned Russian and Belarusian financial institutions and financial institutions in third countries.”

FinCEN also provides several red flag indicators to watch for attempted evasions. Select red flag indicators include for transactions initiated from IP addresses located in Russia, Belarus, or other sanctioned jurisdictions, transactions connected to convertible virtual currency (CVC) addresses listed on OFAC lists of specially designated nationals and blocked persons, and customer use of a CVC exchanger or foreign-located money service businesses in a high-risk jurisdiction.

April 8, 2022/by Hannah Flanders
https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg 0 0 Hannah Flanders https://www.wisbank.com/wp-content/uploads/2021/09/Wisconsin-Bankers-Association-logo.svg Hannah Flanders2022-04-08 07:34:052022-04-08 07:35:08Legal Q&A: Procedures for Information Sharing
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