Page 7 - April 24, 2025 Bulletin

aRTiCLeS

CFPB to Initiate New Section 1071 statement. IRS-CI will also streamline subpoena requests and
Rulemaking share pointers with financial institutions on what to include in
SARs to maximize effectiveness.
In a court filing today, the CFPB said its leadership has directed IRS-CI also released figures on how it uses Bank Secrecy Act data.
staff to initiate new rulemaking to implement Section 1071 More than 87% of the criminal investigations recommended
of the Dodd-Frank Act and plans to soon release a proposal to for prosecution by IRS-CI from fiscal years 2022 to 2024 had a
possibly replace or change its current rule. primary subject with a related BSA filing, with adjudicated cases

The CFPB in 2023 released a final rule implementing Section resulting in a 97.3% conviction rate. Defendants received an
1071, which requires financial institutions to report data on average prison sentence of 37 months. IRS-CI used the data to
small-business lending. Critics said the rule was unwieldy and identify $21.1 billion in fraud tied to tax and financial crimes,
would create numerous compliance headaches, especially for seize $8.2 billion in assets tied to criminal activity and obtain
smaller institutions. Several lawsuits followed, including one $1.4 billion in restitution for crime victims. Nearly 1,600 cases
brought by the Texas Bankers Association and American Bankers IRS-CI opened last year has at least one currency transaction
Association. The CFPB was also sued by the Revenue Based report on the primary subject. More than 67% of cases opened
Finance Coalition in U.S. District Court for Southern Florida. by IRS-CI had a subject with one or more CTRs below $40,000,
In a filing today in that case, the CFPB noted that its leadership with 50% of CTRs involving amounts less than $22,230.
has changed since the original rule was finalized, with Office of IRS-CI added that since 2020, it has used BSA data to initiate
Management and Budget Director Russ Vought currently serving nearly 1,300 investigations with ties to fentanyl and investigate
as the bureau’s active director. The bureau asked the court to alleged employee retention credit fraud totaling $5.5 billion.
suspend any further action until it has proposed a new rule.
Read more: https://www.irs.gov/compliance/criminal-investigation/
“New leadership has been assessing the final rule and the issues irs-ci-releases-fy24-bsa-metrics-announces-ci-first-initiative
that this case presents to determine the CFPB’s position,” the
bureau said in its filing. “CFPB’s new leadership has directed staff
to initiate a new Section 1071 rulemaking. The CFPB anticipates Banking Regulators to Rescind 2023
issuing a Notice of Proposed Rulemaking as expeditiously as
reasonably possible. Because the anticipated rulemaking process Community Reinvestment Act Rule
may moot or otherwise resolve this litigation, holding this matter The Federal Reserve, FDIC and Office of the Comptroller of
in abeyance would conserve the court’s resources.” the Currency have announced they intend to rescind the 2023
The CFPB did not elaborate on when the proposed rulemaking Community Reinvestment Act final rule “in light of pending
would be released or what it would contain. The bureau litigation.” They will instead reinstate the CRA framework that
proposed submitting reports to the court every 90 days during was in place before the rule.
the rulemaking process, with the parties in the case conferring The agencies first proposed the rule in 2022 as part of a long-
within 30 days of a new final rule to decide whether they want to planned overhaul of the CRA framework. They finalized the
proceed with the lawsuit.
rule the following year, although the Fed and FDIC board votes
IRS Launches New Information were not unanimous. The American Bankers Association, U.S.
Chamber of Commerce and five national and state associations
Sharing Initiative for Financial later sued the banking agencies in federal court, arguing that
Institutions regulators exceeded their statutory authority. A federal judge last
year issued a preliminary injunction against enforcing the rule.
The law enforcement arm of the IRS has launched a new program In a brief statement, the three banking agencies said they will
to ensure financial institutions receive “quantifiable results” on “continue to work together to promote a consistent regulatory
how the agency uses suspicious activity reports to investigate approach on their implementation of the CRA.” They did not
federal crimes. provide a timeline for when the Fed and FDIC boards plan to
As part of the CI-FIRST initiative, IRS Criminal Investigation vote on rescinding the rule.
headquarters will work with larger financial institutions with a Read more: https://www.federalreserve.gov/newsevents/
national and international presence, and field office personnel pressreleases/bcreg20250328a.htm
will work with regional and community banks and credit unions
in their respective areas of responsibility, according to an agency

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