The Financial Crimes Enforcement Network last week issued government-wide policy priorities for anti-money laundering and countering the financing of terrorism. According to the priorities, the most significant AML/CFT threats currently facing the country are corruption, cybercrime, domestic and international terrorist financing, fraud, transnational criminal organization activity, drug trafficking organization activity, human trafficking and human smuggling, and proliferation financing.

In a separate interagency statement issued by FinCEN and the federal banking agencies, the agencies stated that publication of the priorities “does not create an immediate change to Bank Secrecy Act requirements or supervisory expectations for banks.” The agencies said they will revise their BSA regulations within the next six months to address how the priorities will be incorporated into banks’ BSA requirements.

The SDBA is currently accepting photo submissions for its 2022 Scenes of South Dakota Calendar. The calendar features photos of South Dakota submitted by South Dakota bankers, their family members and customers.

If you or one of your bank’s employees, a relative or customer are an amateur photographer and would like the opportunity to have your creativity displayed in homes and businesses across the state, send the SDBA your photos of farms, barns, agricultural activities, historical South Dakota locations, county fairs, carnivals, parades or festivals, fall colors, winter snowfalls, spring flowers, summer fun, etc.

The South Dakota Department of Health (DOH) last Thursday released its proposed administrative rules to implement the medical cannabis program created by voters in Initiated Measure 26 (IM 26). IM 26 directs the DOH to enact final administrative rules for medical cannabis by Oct. 29, 2021, and the agency is on schedule to meet this deadline, according to a press release. 

“The proposed administrative rules are one of many steps our Department has taken to develop a safe and responsible medical cannabis program in South Dakota, as the voters intended,” said Secretary of Health Kim Malsam-Rysdon.

The SDBA will hold its 2021 Agricultural Credit Conference on July 21-22 at the Ramkota Hotel & Conference Center in Pierre.

The South Dakota Bankers Association (SDBA), the professional and trade association for South Dakota’s financial services industry, elected officers for its 2021-2022 Board of Directors. The SDBA is honored to have the following individuals serve as officers:

• Chair: Kristina Schaefer, General Counsel & Chief Risk Officer, First Bank & Trust, Sioux Falls
• Chair-Elect: David Bangasser, Southern Region President, Dacotah Bank, Sioux Falls
• Vice Chair: David Nelson, President/CEO, First Fidelity Bank, Burke
• Immediate Past Chair: Steve Bumann, CFO, BankWest, Inc., Pierre

The official election took place at the SDBA’s Annual Business Meeting held on June 15 in Rapid City. The term for the new officers is effective now through next year’s Annual Business Meeting.

Agricultural lending by the nation’s farm banks dipped 1.8% to $98.6 billion in 2020 as demand for agricultural production loans declined slightly, according to ABA’s annual Farm Bank Performance Report released on Monday. Agricultural production loan demand declined 6.7% due to rising costs, supply and production bottlenecks, price volatility and an increase in federal cash payments, the report found. Government payments also enabled producers to pay down existing loan balances.

“American farm banks have remained healthy this past year and continued to play a critical role in supporting farmers and the broader U.S. economy through the turbulence of 2020,” said ABA Chief Economist Sayee Srinivasan. “While the agricultural sector will continue to face challenges as the economy reopens and recovers from the coronavirus pandemic, the strong asset quality and capital levels of America’s farm banks will help ensure that they continue to provide support to rural communities.”

The South Dakota Department of Health will hold two telephone town hall events on Monday, June 28, to receive public input on the implementation and rule-making process for medical cannabis in South Dakota.

The public will have the opportunity to ask questions, provide their feedback and listen to the latest updates on the implementation of IM-26. The town halls will be held at 5 p.m. CDT and 6:30 p.m. CDT on Monday.

The South Dakota Department of Health, South Dakota Department of Education and Gov. Kristi Noem last Thursday launched medcannabis.sd.gov, a website to answer questions and provide information about the upcoming medical cannabis program set to take effect on July 1, 2021.

“One of my jobs as governor is to make sure that the will of the people and all constitutional laws are enforced,” said Gov. Noem. “I want South Dakota to have the best, most patient-focused medical cannabis program in the country. I’ve heard from people who are hurting and are hopeful for relief. My team is 100% committed to starting this program as quickly and as responsibly as possible for South Dakota.”

The South Dakota Banking Commission will hold a public hearing on July 8 at 1:30 p.m. CDT via telephone to consider the adoption of proposed rules.

Proposed Rule 20:07:06:01.02: The effect of the proposed rule is to abate the examination fee assessed to state-chartered banks for the June 2021 semiannual examination fee assessment period. The reason for adopting the rule is to manage the accumulation of money in the Banking Revolving Fund.

More than 325 bankers from South Dakota, North Dakota, Montana and Wyoming and their business partners came together and celebrated all that we have accomplished this past year at the 2021 Quad States Convention in Rapid City on Monday and Tuesday. The theme of this year's event was "A New Direction: Reimagine, Reinvent, Revolutionize."

The convention began on Monday afternoon with a golf tournament and optional tours of Custer State Park, downtown Rapid City and Journey Museum, followed by a welcome party that evening at The Monument. Tuesday began with individual business meetings of the four state bankers associations, followed by a day of speakers on a variety of timely topics. The event concluded with a reception, during which the Wyoming Bankers Association won the Quad States Family Feud.

Ahead of a House Ways and Means subcommittee hearing today on shrinking the tax gap, ABA and 10 other financial trade associations cautioned lawmakers about creating new reporting requirements for banks that would “impose cost and complexity that are not justified by the potential, and highly uncertain, benefits.” Such a proposal was included in President Biden’s American Families Plan, which called for financial institutions to report information on account flows, including earnings from investments and business activity.

The groups noted that while only limited details were provided in the recently released “Green Book,” which contains information on the tax changes that the Biden administration is proposing to help fund the budget for the coming fiscal year, “the limited additional information . . . suggests that this new regime could be exceptionally expansive and comprehensive, covering the accounts of most Americans, rather than only the ‘wealthiest,’ as described in the American Families Plan.”

The Internal Revenue Service on Monday urged all individuals and families who have not yet filed their 2019 or 2020 tax returns to do so as soon as possible so that those who are eligible may begin receiving the expanded Child Tax Credit payments, which were authorized by the American Rescue Plan and which will begin to be distributed on July 15. The IRS is in the process of sending letters to more than 36 million American families who may be eligible, based on tax information on record.

Eligible families will begin receiving advance payments either by direct deposit or check. Under the expanded tax credit, payments may be up to $300 per month for each qualifying child under age six and up to $250 per month for each qualifying child between the ages of six and 17. The IRS noted that “most families do not need to take any action to get their payment,” and that payments will be calculated based on the 2020 tax return, if available. If the 2020 return is not available, the IRS will determine the payment amount using the 2019 return.

The SDBA will host the 2021 Quad States Convention on Monday and Tuesday, June 14-15, in Rapid City at The Monument. This year's convention will celebrate all that we have accomplished this past year as we reimagine, reinvent and revolutionize in a new direction. The event includes bankers from South Dakota, North Dakota, Montana and Wyoming and their business partners. 

Due to hosting the convention, the SDBA Office will be closed Monday through Wednesday, June 14-16, and will reopen on Thursday, June 17. 

As the OCC reviews recent interpretive letters on digital assets and trust charters, “everything’s on the table,” current Acting Comptroller Michael Hsu told reporters during a press briefing yesterday—including reviewing provisional approvals already granted under prior acting agency leadership.

“Charters that were in the pipeline as well as those that were conditionally approved” are “in the scope of the review,” Hsu said. For example, cryptocurrency firms Anchorage, Paxos and Protego have received conditional approvals for national trust charters to custody digital assets.

Sen. Brian Schatz (D-Hawaii) and Rep. Sean Casten (D-Ill.) introduced legislation last Thursday that would direct the Federal Reserve to subject large banks to stress tests to measure their resilience to climate-related financial risks. Schatz previously introduced the bill in the last Congress.

Among other things, the bill would direct the Fed to establish and work with an advisory group of climate scientists and economists to develop climate change scenarios, including a 1.5 degree Celsius warming scenario, a 2 degree warming scenario, and a “business as usual” scenario, which assumes a higher level of warming if there are no climate policies in place.

The Treasury Department last Friday released its “Green Book,” which contains details on the tax changes that the Biden administration is proposing to help fund the budget for the coming fiscal year. High-level descriptions of most of the tax proposals have been included in the Biden administration’s previously released legislative agendas. The Green Book provides explanations of the proposals and suggested legislative and technical changes required should they be adopted.

The 114-page document includes increases in the corporate tax rate to 28% and an increase in the individual tax rate to 39.6%, effective starting after the 2021 tax year. It also includes a book earnings minimum tax, significant changes to international taxation rules and elimination of the capital gains rate preference and step-up in basis at death (excluding $1 million in gains).

Members of the Federal Reserve’s Community Depository Institutions Advisory Council—which includes several ABA member bank CEOs—raised concerns about the growing number of nonbank competitors seeking to offer banking products and services while circumventing the traditional regulatory structure, according to minutes released last Friday by the Fed.

“Regulations exist for a reason; they protect consumers and other financial institutions that provide services and conduct transactions as counterparties,” council members noted. “When one segment of the industry is allowed to operate under fewer rules that provide economic gain to that segment at the cost of greater counter-party and systemic risk, the overall financial ecosystem is placed at greater risk.”

An estimated 124.2 million households were considered “banked” in 2019, with at least one member having a checking or savings account, according to FDIC figures that were highlighted in a new report from the ABA on Tuesday on access to the banking system. Banking services are widely available to Americans, the report found, with the average person living within commuting distance of 25 branch locations.

Recent research suggests that consumers are increasingly turning toward mobile channels to access financial services. Prior to the pandemic, 34% of American households used mobile channels as their primary channel to access their bank accounts. COVID-19 caused a further uptick in preference for mobile banking options: 97% of banks reported an acceleration in mobile adoption among their customers as a result.

President Biden last week signed an executive order on climate-related financial risk that, among other things, directs financial regulators to take several steps to ensure the appropriate measurement and mitigation of these risks. The order directs the treasury secretary to work with the members of the Financial Stability Oversight Council to consider “assessing, in a detailed and comprehensive manner, the climate-related financial risk, including both physical and transition risks, to the financial stability of the federal government and the stability of the U.S. financial system,” as well as facilitating the sharing of climate-related risk information between FSOC member agencies and other areas of the federal government as needed.

In addition, Treasury must issue a report within 180 days on current efforts by the financial regulatory agencies to incorporate climate-related financial risk into their policies and programs. That report should include recommendations on how “identified climate-related financial risks can be mitigated, including through new or revised regulatory standards as appropriate,” according to the order. This action by the Biden administration comes after officials from the Federal Reserve, OCC, FDIC and SEC in recent weeks have all indicated that they are focusing efforts on climate-related financial risks.

Testifying before the House Financial Services Committee yesterday, Acting Comptroller of the Currency Michael Hsu said that the OCC needs to determine how to charter fintech firms in a “safe and sound way, where we can adapt to the innovation.”

“Some are concerned that providing charters to fintechs will convey the benefits of banking without its responsibilities,” Hsu said. “Others are concerned that refusing to charter fintechs will encourage growth of another shadow banking system outside the reach of regulators. I share both of these concerns. We must find a way to consider how fintechs and payment platforms fit into the banking system, and we must do it in coordination with the FDIC, Federal Reserve and the states.”