Recent developments about the New York State Department of Financial Services
(Not affiliated with NYDFS; just a blog.)
NYDFS issued what it called a “Pre-Proposed Outreach” for Proposed Amendments to Its Cybersecurity Regulation. The changes are significant and in some sense more prescriptive. Comments are due August 8; to be followed by the actual proposed rulemaking under the state Administrative Procedure Act and a 60-day comment period. The NYDFS Pre-Proposal is available here: … Read more
NYDFS has issued its first enforcement action against one of its regulated cryptocurrency entities. Enforcement takeaways: $30 million penalty is significant. Alleged violations include BSA/AML; Cybersecurity; Reporting; and Consumer Protection. The Department alleged adequate resources were not devoted to RHC’s compliance programs, particularly as it grew, which exacerbated compliance issues. Robinhood improperly certified compliance with … Read more
NYDFS continues its actions against insurance companies for allegations of unlicensed activity occurring in New York. NYDFS leveled a $3.5 million penalty against Banner Life Insurance Company for unlicensed conduct relating to the pension risk transfer (PRT) business, where companies that carry pension obligations sell them to insurance companies to meet into the future. According … Read more
THE FDIC has joined the party, commencing investigations and issuing cease and desist letters for what it deems are misrepresentations concerning the applicability of FDIC insurance to the accounts of crypto customers. Other regulatory investigations of recent crypto firm failures include some state banking regulators/AGs. More on this from Coindesk: https://www.coindesk.com/policy/2022/07/07/fdic-probing-voyager-claims-it-was-insured-by-regulator-report/ https://www.coindesk.com/policy/2022/07/28/crypto-lender-voyager-ordered-by-us-regulators-to-stop-misleading-customers/
According to reporting from Coindesk, OFAC appears to be ramping up enforcement in the crypto space — mentions of Kraken and Binance. See article here: https://www.coindesk.com/policy/2022/07/26/kraken-under-investigation-for-alleged-sanctions-violations-report/?utm_source=Sailthru&utm_medium=email&utm_campaign=FIRST%20MOVER%20JULY%2027%202022&utm_term=First%20Mover
At an ACAMS conference NYDFS Superintendent Adrienne A. Harris stated that guidance on non-fungible tokens — NFTs — will be forthcoming. “You will continue to see leadership from DFS in virtual currency,” Harris said, adding that the regulator intended to advise the financial sector on non-fungible tokens,” A Financial News article covering the discussion is … Read more
More cybersecurity enforcement from NYDFS, this time against Carnival Cruise Lines. Enforcement takeaways: Carnival Cruise Lines paid $5 million and surrendered its license to be an insurance broker in New York. It had sold life, accident and health insurance to cruise customers. NYDFS alleged “significant” violations, including: Failure to implement multi-factor authentication; Failure to timely … Read more
Strong compliance personnel remain one of the best investments for a financial institution, and an ongoing challenge, per the OCC: “Compliance risk remains heightened…. [T]he OCC has observed an increase in the competition for compliance subject matter experts, at both the bank management and staff levels.” The OCC Report may be found here: https://www.occ.treas.gov/publications-and-resources/publications/semiannual-risk-perspective/files/semiannual-risk-perspective-spring-2022.html
Its finally here: first-in-the-nation stablecoin guidance for regulated cryptocurrency entities. Some highlights: Backing and Redeemability: The stablecoin must be fully backed by a Reserve of assets, meaning that the market value of the Reserve is at least equal to the nominal value of all outstanding units of the stablecoin as of the end of each … Read more
NYDFS entered into a consent order with Nationwide Life Insurance Company for $5.6 million in penalties and restitution arising from violations alleged to have occurred in connection with the annuity replacement business. According to NYDFS, “DFS’s investigation found that Nationwide failed to properly disclose to consumers income comparisons and suitability information, causing consumers to exchange … Read more