House Financial Services Committee Considers Proposed Legislation on Cybersecurity

Steven Lofchie Commentary by Steven Lofchie

The U.S. House Financial Services Subcommittee on National Security, International Development and Monetary Policy considered legislative proposals aimed at addressing fraud and cybersecurity vulnerabilities. The Subcommittee considered the following:

  • H.R. ____, the "Internet Fraud Prevention Act," which would implement measures to prevent business email compromise ("BEC") scams including (i) investigation of, and potential remediation by, federal regulators and the FBI of BEC scams; (ii) inclusion of BEC in Bank Secrecy Act/Anti-Money Laundering examination procedures by the Federal Financial Institutions Examination Council; and (iii) the creation of BEC education materials;

  • H.R. ____, the "COVID-19 Restitution Assistance Fund for Victims of Securities Violations Act," which would establish the "Securities Restitution Assistance Fund" at the SEC to provide restitution payments for victims of securities fraud in connection with the COVID-19 pandemic;

  • H.R. ____, the "Senior Investor Pandemic and Fraud Protection Act," which would increase funding to states in an effort to protect vulnerable populations from "misleading and fraudulent marketing or sales practices" in relation to the COVID-19 pandemic; and

  • H.R. ___, which would require federal financial regulatory agencies to issue guidance regarding depository institutions establishing education programs for customers at risk of being targeted by bad actors seeking to transfer illegally acquired funds.

The Subcommittee also heard testimony from the following witnesses:

  • VMware, Inc. Head of Cybersecurity Strategy Tom Kellermann;

  • National Cyber Security Alliance Executive Director Kelvin Coleman;

  • Alabama Securities Commission Chief Deputy Director Amanda W. Senn (on behalf of the North American Securities Administrators Association); and

  • National Security Institute Founder and Executive Director Jamil N. Jaffer.

Commentary

Proposed legislation that would provide consumer education to discourage investment in pandemic-related frauds seems reasonable. Reimbursing victims of pandemic fraud does not. If the government cannot reimburse every investor who is ripped off, why should it favor a particular class of victim?

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