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RBC on radar in Chicago today: Listening session audios to be available

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CHICAGO (7/10/14)--The National Credit Union Administration's second of three Listening Session of 2014 starts today at 1 p.m. (CT) in Chicago.  Almost 170 people are registered for the event.

The session is intended to give credit unions a forum to discuss what is on their minds directly with their federal regulators. The agency's risk-based capital proposal was the primary topic during the previous session in Los Angeles in June, and is expected to be front and center today as well.

NCUA Chair Debbie Matz, board members Michael Fryzel and Rick Metsger are expected to attend. Other top-level NCUA staff will be on hand.

The California and Nevada Credit Union Leagues have posted audio clips of the California session to their website (see resource link). CUNA will also post the California session audio on CUNA.org--and NCUA will post recordings of each listening event over the coming weeks.  (News Now July 9).

A third and final Listening Session will take place July 17 in Alexandria, Va. The event is currently full, but a waitlist is available on the NCUA website.

Castro confirmed as new HUD secretary

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WASHINGTON (7/10/14)--The U.S. Senate confirmed Julian Castro to become the new head of the Department of Housing and Urban Development Thursday. Castro, the mayor of San Antonio, was confirmed by a vote of 71-26.
 
Castro, 39, was nominated in May by President Barack Obama, who called Castro a "proven leader, a champion for safe, affordable housing and strong, sustainable neighborhoods" in a statement released after the confirmation hearing.
 
"I know that together with the dedicated professionals at HUD, Julian will help build on the progress we've made battling back from the Great Recession--rebuilding our housing market, reducing homelessness among veterans, and connecting neighborhoods with good schools and good jobs that help our citizens succeed," Obama said.
 
Castro has been mayor of San Antonio since 2009. His twin brother, Joaquin, is a Democratic congressman from Texas, representing the state's 20th District.

CUNA, trades seek stronger 'patent troll' defense measures

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WASHINGTON (7/10/14)--As a House Energy and Commerce subcommittee moves forward with a vote on a patent reform bill today, the Credit Union National Association sent a joint financial trade group letter to urge lawmakers to strengthen its provisions to fight
 
The bill is intended, in part, to address the problem of Patent Assertion Entities (PAEs), often referred to as patent trolls, who in most cases assert patents of dubious quality through vaguely worded demand letters or intentionally vague complaints to force settlements or payments.
 
Financial institutions of every size have been targeted by PAEs, the joint letter states. It warns patent trolls' recent focus on credit unions and community banks threatens to pose "additional, unwarranted costs on lenders and the communities they serve."
 
"In our industry alone, there are hundreds of examples of a patent troll attempting to sell a product--the patent license--to a bank or credit union using tactics resembling fraud or extortion," the letter says. It is addressed to Rep. Lee Terry (R-Neb.), chairman of the House Energy and Commerce subcommittee on commerce, manufacturing and trade, and its ranking member, Rep. Jan Schakowsky (D-Ill.).
 
While calling the lawmakers' bill "a step in the right direction," CUNA encourages them to do more to ensure the bill can be an effective tool for financial institutions. The bill should limit the number of exceptions provided to patent trolls, such as through affirmative defenses to fraudulent behavior, and should allow states with effective laws to continue to enforce them.
 
The subcommittee began a markup of the bill Wednesday and votes continue today. In addition to CUNA, the letter is signed by the National Association of Federal Credit Unions, the American Bankers Association and the Independent Community Bankers of America.
 
CUNA has repeatedly urged lawmakers to act to curb the patent system abuses. "Reforms are desperately needed. This growing problem will not be solved until Congress passes bipartisan legislation that makes clear patent trolls can no longer get away with abusing the system," CUNA has said in letters of support for such legislation.

CUNA and the state credit union associations have been active on every level urging lawmakers and the Obama administration that patent reform is needed.

FATF offers definitions, pros and cons of virtual currencies

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WASHINGTON (7/10/14)--The Financial Action Task Force (FATF) called virtual currencies both "the wave of the future" and a powerful new tool for criminals to move and store illicit funds, in a paper released last month. The FATF is an intergovernmental body that develops and promotes policies to protect the global financial system from money laundering and terrorist financing. The United States is one of 37 member countries.

For the FATF's purposes, a virtual currency is defined as "a digital representation of value that can be digitally traded and functions as a medium of exchange; and/or a unit of account; and/or a store of value, but does not have legal tender status of payment in any jurisdiction."

The FATF lists several benefits of virtual currencies, particularly the potential to improve payment efficiency and reduce transaction costs.

"For example, Bitcoin functions as a global currency that can avoid exchange fees, is currently processed with lower fees/charges than traditional credit and debit cards and may potentially provide benefit to existing online payment systems, like Paypal," the report reads.

However, the anonymous nature of many such currencies create many opportunities for money laundering and terrorist financing, two activities which the FATF exists to combat. The FATF's primary mission is to develop recommendations that are recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard.

"Virtual currency's global reach likewise increases its potential AML/CFT risks. Virtual currency systems can be accessed via the Internet, including via mobile phones, and can be used to make cross-border payments and funds transfers," the report reads. "In addition, virtual currencies commonly rely on complex infrastructures that involve several entities, often spread across several countries, to transfer funds or execute payments. This segmentation of services means that responsibility for AML/CFT compliance and supervision/enforcement may be unclear."

The report also lists several high-profile cases that have come up in recent years, all of which involve abuse of virtual currency for money-laundering purposes:
  • In May 2013, the U.S. Department of Justice charged Liberty Reserve, a Costa Rica-based money transmitter, and seven of its principals and employees with facilitating the movement of more than $6 billion in illicit proceeds. This is the largest online money-laundering case to date.

  • In September 2013, the U.S. Department of Justice seized the website known as Silk Road, which included approximately 173,991 bitcoins, worth more than $33.6 million. The site operated as a "global black-market bazaar" used by thousands of drug dealers and other vendors distributing unlawful goods.

  • An eight-year investigation of Western Express International, a multinational Internet-based cybercrime group, resulted in convictions or guilty pleas from 16 individuals. It was an enterprise composed of individuals buying and selling nearly 100,000 stolen credit card numbers and other personal information using virtual currencies.
Use the resource link below to access the full report.

Sen. committee passes information-sharing cybersecurity bill

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WASHINGTON (7/10/14)--The U.S. Senate Intelligence Committee passed the Cybersecurity Information Sharing Act by a 12-3 vote Wednesday. The bill would expand information shared about cybersecurity threats and defense mechanisms between the government and private sector.

"Every week we hear about the theft of personal information from retailers and trade secrets from innovative businesses, as well as ongoing efforts by foreign nations to hack government networks. This bill is an important step toward curbing these dangerous cyber attacks," said Sen. Dianne Feinstein (D-Calif.), chair of the committee, in statement. "To strengthen our networks, the government and private sector need to share information about attacks they are facing and how best to defend against them. This bill provides for that sharing through a purely voluntary process and with significant measures to protect private information."

Committee Vice Chair Sen. Saxby Chambliss (R-Ga.) said the bill would allow businesses and the government to share information "without fear of frivolous lawsuits and without unnecessary bureaucratic obstacles."

The act calls for:
  • The director of national intelligence to increase sharing of classified and unclassified cyberthreat information to the private sector;

  • Individuals and companies to monitor their own computer networks and those of consenting customers for cyberthreats and to implement countermeasures to block threats;

  • Authorization of the voluntary sharing of cyberthreat information by individuals and companies with each other and with the government. Sharing is for cybersecurity purposes only and companies must take appropriate measures to protect against the sharing of personal information;

  • Liability protections to be put in place for individuals and companies that appropriately monitor their networks or share cyberinformation;
  • Federal government procedures for the receipt, sharing and use of cyberinformation;

  • A limit to the government's ability to use information it receives to cyber-related purposes to ensure it does not engage in inappropriate investigations or regulation; and
  • Reports on the implementation of these authorities by the heads of federal departments, the Privacy and Civil Liberties Oversight Board and relevant inspectors general.
The committee's adopted version of the act is expected to be introduced later this week.

Monetary policy hearings coming next week

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WASHINGTON (7/10/14)--Federal Reserve Board Chair Janet Yellen is scheduled to deliver the Fed's semiannual monetary policy report to the Senate Banking Committee on Tuesday and then to the House Financial Services Committee Wednesday.
 
The hearings are scheduled to begin at 10 a.m. (ET) and, at each, the Fed chair will present her report and then answer lawmakers' questions.
 
Yellen made her first semiannual report to Congress as Fed chair in February, at which time she said substantial progress had been made in restoring the economy to health and in strengthening the financial system, but there was still more to do.

"Too many Americans remain unemployed, inflation remains below our longer-run objective, and the work of making the financial system more robust has not yet been completed," she said, just weeks after taking the helm.
 
The public airing of the chairman's assessment of monetary policy is required under the Humphrey-Hawkins Act.