WASHINGTON - On Wednesday, June 26, the Department of the Treasury (Treasury) and the Consumer Financial Protection Bureau (CFPB) co-hosted a virtual roundtable to discuss federal government efforts to promote access to financial products and services while protecting the U.S. financial system from illicit actors and bolstering national security, as well as ensuring compatibility with consumer protection policies. The roundtable was led by Treasury Under Secretary for Terrorism and Financial Intelligence (TFI) Brian Nelson and CFPB Director Rohit Chopra.  Other senior leaders from the Treasury participated in the roundtable as well and helped outline U.S. Government current efforts while also identifying what further needed to be done.

Treasury’s De-Risking and Financial Inclusion Priorities and Progress

Under Secretary Nelson discussed Treasury’s 2023 National De-Risking Strategy, emphasizing that the inequitable curtailment of financial access is an area of pressing concern, while reinforcing the recommendations that Treasury laid out in the De-Risking Strategy to help address these issues.

He highlighted the 2022 statement on customer due diligence published by Treasury’s Financial Crimes Enforcement Network (FinCEN) in July 2022, which reiterated Treasury’s longstanding position that no customer type represents a single level of uniform risk and that financial institutions are required to apply a risk-based approach.

He also underscored the impact of the historic general licenses issued or amended by TFI’s Office of Foreign Assets Control to support the flow of humanitarian assistance to vulnerable populations across the globe. The United States took the global lead to issue and amend these general licenses to ease the delivery of humanitarian aid and ensure a baseline of authorizations for the provision of humanitarian support across many sanctions programs.

Notably, Under Secretary Nelson discussed how Treasury soon would be proposing an update to the requirements for anti-money laundering and countering the financing of terrorism (AML/CFT) compliance programs, which would seek to help banks and other private sector firms be more effective and flexible in detecting and preventing illicit activity.   

Update:  On July 3, 2024, Treasury’s FinCEN issued a proposed rule to strengthen and modernize AML/CFT programs.  The proposed rule seeks to avoid one-size-fits-all approaches to customer risk that can lead to financial institutions declining to provide financial services to entire categories of customers. This proposal is consistent with a key recommendation in Treasury’s De-risking Strategy, which recommended proposing regulations to require financial institutions to have reasonably designed and risk-based AML/CFT programs supervised on a risk basis and taking into consideration the effects of financial inclusion. The proposed rule can be found on the Federal Register and written comments must be received on or before September 3, 2024.

CFPB Priorities and Milestones

Director Chopra underscored the crucial importance of account access for financial inclusion and participation in society. Financial institutions have obligations to consumers under federal consumer financial law, in addition to their obligations to address fraud and illicit finance. For firms with careful, accurate programs, risk management and consumer protection are not in tension. However, overbroad policies or practices that affect ordinary consumers in addition to illicit actors may be unlawful.

As examples, Director Chopra described recent actions the CFPB has taken to address unlawful practices related to account closures, freezes, and denials. In November 2023, the CFPB took action against Citi for illegal discrimination against consumers the bank identified as Armenian American. The bank denied credit to consumers singled out as Armenian American due to a stereotype that this group of consumers was prone to crime and fraud. In December 2023, the CFPB took action against U.S. Bank for freezing tens of thousands of prepaid accounts for out-of-work consumers receiving unemployment benefits during the height of the COVID-19 pandemic, without providing people a reliable and quick way to regain access. Consumers were unable to access their accounts for weeks or more at a time.

Director Chopra expressed concerns about the role played by third-party data brokers and screening companies, given the pivotal services they provide financial institutions, and about consumers’ inability to contest unexplained account closures.

He also called for more collaboration with stakeholders to ensure consumers are able to access bank accounts and other financial services.  

The Director encouraged attendees who encounter problems with account denial, closure, or freezing to submit a complaint to the CFPB.

Feedback from the Community

Community leaders and consumer advocates – representing Muslim and Arab Americans, New Americans, justice-involved individuals and other individuals, business and non-profit organizations – shared remarks with Director Chopra and Under Secretary Nelson regarding their personal and community experiences with account denial, freezes or closures, and discussed steps that policymakers and financial institutions could take to address these issues. For account opening, speakers discussed how institutional customer identification protocols can create barriers to account access for consumers who may have difficulty obtaining state-issued ID but can establish their identity through other means. For the impact of de-risking practices on consumers with bank accounts, speakers highlighted how account freezes and closures can cause significant financial harm to consumers, non-profit organizations, and small businesses. They expressed concern about third-party entities providing inaccurate and biased information used by financial institutions. They also described difficulties with learning why their accounts were frozen or closed and being left with no opportunity for meaningful recourse with their financial institution. Stakeholders noted that the exclusion of consumers from basic, mainstream financial products such as deposit accounts can spread fear and uncertainty in communities and likely lead consumers to rely on higher-cost alternative providers that may present greater risks.

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The roundtable concluded with Under Secretary Nelson stating that he welcomed comments on the proposed rule for AML programs after publication through the public comment process available online, and confirmed how informative he found the dialogue to be in shaping his understanding around de-risking. Director Chopra equally praised the information and context he gained during the roundtable, and reiterated the ask for individuals to reach out to the CFPB and submit a consumer complaint when they feel they might be the victim of discrimination or other unlawful practices.