Treasury and Federal Reserve Support G-7 Elements of Cybersecurity for the Financial Sector

On October 11, the U.S. Department of the Treasury announced that the Group of Seven (G-7) countries – comprised of the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom – issued fundamental elements to “help address cyber risks facing the financial sector from both entity-specific and system-wide perspectives.” In Fundamental Elements of Cybersecurity for the Financial Sector, G-7 outlines eight elements for private and public entities within the financial sector to use as “building blocks” for confronting cyber-related issues, the first of which is to establish and implement tailored cybersecurity strategies and operational frameworks that should be tailored to an entity’s nature, size, complexity, risk profile, and culture. G-7’s remaining seven elements are as follows: (i) define and facilitate effective governance structures to ensure accountability; (ii) identify cyber risks and implement control assessments, including systems, policies, procedures, and training; (iii) “establish systematic monitoring processes to rapidly detect cyber incidents and periodically evaluate the effectiveness of identified controls, including through network monitoring, testing, audits, and exercises”; (iv) ensure that incident response policies are effective and guarantee timeliness; (v) establish and test contingency plans that help to ensure effective recovery of critical functions and operations; (vi) share cybersecurity information with internal and external stakeholders, including threat indicators, vulnerabilities, and incidents; and (vii) develop a review process that addresses, among other things, evolving cyber risks. In support of the G-7 elements, Federal Reserve Vice Chairman Stanley Fischer stated that they are “a crucial step in furthering hardening each link in the chain of our global financial system.”


Special Alert: OCC to Issue Guidance on “De-Risking” in Foreign Correspondent Banking Relationships

OCC Comptroller Thomas J. Curry announced Wednesday during a speech at the Association of Certified Anti-Money Laundering Specialists (ACAMS) conference that the OCC is developing guidance around “de-risking” in foreign correspondent banking relationships. Following the joint fact sheet published by the federal banking agencies and the Department of Treasury, Comptroller Curry said that it will issue “guidance that reiterates our risk management expectations for banks to establish and follow policies and procedures for regularly conducting risk evaluations of their foreign correspondent portfolios.” The guidance will describe “best practices” that the OCC has observed that banks can use when “re-evaluating their risks and making decisions about retaining or terminating foreign correspondent accounts.”

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House Passes Bill to Bring Transparency to Iranian Finances

On September 21, the House of Representatives voted to pass the Iranian Leadership Asset Transparency Act. This bill, HR 5461, would require the Treasury Secretary to publish a list of assets held by senior Iranian political and military leaders, including where the assets were acquired, and how they are employed. The Treasury would also be required to identify new methods used to evade anti-money laundering laws and provide recommendations to improve techniques to combat illicit uses of the U.S. financial system by each official. The required report would be posted on the Treasury Department’s website in English, but also in the three major languages spoken within Iran.


CFPB Issues Principles for the Future of Loss Mitigation

On August 2, the CFPB released consumer protection principles for mortgage servicers to use as they develop new foreclosure relief solutions in anticipation of Treasury’s Home Affordable Modification Program’s (HAMP) upcoming expiration date (CFPB Principles). The CFPB Principles echo those summarized in FHFA’s, HUD’s, and Treasury’s recently published white paper, “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” As previously covered in InfoBytes, the white paper recommends that future loss mitigation programs promote accessibility, affordability, sustainability, transparency, and accountability. The CFPB Principles address accessibility, affordability, sustainability, and transparency, and cite to separate CFPB mortgage servicing rules for standards concerning accountability. In its press release, the CFPB notes that the four principles “do not establish binding legal requirements but instead are intended to complement ongoing discussions among industry, consumer, groups, and policymakers.”


Agencies Issue White Paper Regarding Loss Mitigation Programs

On July 25, FHFA, HUD, and Treasury published a white paper titled “Guiding Principles for the Future of Loss Mitigation: How the Lessons Learned from the Financial Crisis Can Influence the Path Forward.” The paper examines the effect of the 2008 financial crisis on the mortgage servicing industry with a focus on loss mitigation programs. Under the 2009 Making Home Affordable (MHA) program, foreclosure alternatives were established to address the needs of homeowners and to improve the mortgage servicing industry’s loss mitigation practices. According to the paper, between April 2009 and the end of May 2016, 10.5 million modification and mortgage assistance arrangements were completed through government programs and private sector efforts. The paper further notes that, as a result of  FHFA’s, HUD’s, and Treasury’s programs, regulatory actions, and private sector initiatives, the mortgage industry is “generally better prepared now to provide assistance to struggling homeowners than it was before the crisis.” The improvement “is due, in part, to the adoption of certain homeowner engagement standards including continuity of contact, solicitation timeframes, and certain notice and appeal processes required by the [CFPB].” At the end of 2016, MHA programs, such as HAMP, will come to a close. Based on the agencies’ collective experience with MHA programs, the paper identifies  five guiding principles for loss mitigation programs: (i) accessibility, guaranteeing homeowners a simple process for obtaining mortgage assistance; (ii) affordability, “providing homeowners with meaningful payment relief that addresses the needs of the homeowner, the servicer and the investor, to support long-term performance”; (iii) sustainability, offering long-term solutions intended to resolve delinquency; (iv) transparency, “[e]nsuring that the process to obtain assistance, and the terms of that assistance, are as clear and understandable as possible to homeowners, and that information about options and their utilization is available to the appropriate parties”; and (v) accountability, ensuring sufficient oversight of the process to obtain mortgage assistance.