HFS Advances Fraud-Prevention Legislation

The House Financial Services Committee advanced a legislative package focused on curbing technology-accelerated financial fraud. The full House of Representatives passed bills providing regulatory relief to smaller banks. 

At the markup hearing, HFS Chair French Hill described a series of bills as a coordinated response to fraud schemes that increasingly use technology to operate at scale and evade detection.   

The Committee advanced:

• the Artificial Intelligence Practices, Logistics, Actions, and Necessities ("PLAN") Act, which would direct the executive branch to develop a comprehensive plan to safeguard the financial system and sensitive data against the misuse of AI technologies.
• the Unleashing AI Innovation in Financial Services Act which would promote the use of AI in financial services through regulatory sandboxes that let federal agencies test and evaluate emerging technologies.
• the Bank Fraud Technology Advancement Act which would direct federal regulators to study how institutions use advanced fraud-detection technologies and would establish a voluntary pilot program to help smaller banks and credit unions access those tools.
• the Guarding Unprotected Aging Retirees from Deception ("GUARD Act,") which would strengthen law enforcement's ability to investigate financial scams targeting seniors. The bill would give state, local, and Tribal agencies access to federal grant funding for these investigations, improve coordination with federal agencies, and expand access to blockchain tracing tools used to combat illicit activity; and
• the Fostering the Use of Technology to Uphold Regulatory Effectiveness in Supervision ("FUTURES") Act would modernize the technology capabilities of federal financial regulators by requiring them to assess their current capabilities and identify gaps.

Separately, by voice vote, the House of Representatives passed bills aimed at providing relief to smaller and community banks. They included:

• the Supervisory Modifications for Appropriate Risk-Based Testing ("SMART Act,") which would "tailor supervisory requirements for smaller institutions that are well managed and well capitalized, allowing community financial institutions to focus more resources on serving customers and local economies." Mr. Hill stated: "the SMART Act makes further improvements to bank and credit union examinations, including requiring federal regulators to improve examination practices by assigning experienced examiners, minimizing unnecessary on-site disruptions, and ensuring that exams are conducted in a more efficient and predictable manner;" and 

• the Tailored Regulatory Updates for Supervisory Testing ("TRUST Act,") which "allows smaller banks that are well managed and well capitalized to be examined less frequently, which reduces unnecessary compliance costs, increases their time serving customers, and maintains strong oversight and financial stability." Specifically, the bill would "permit Federal banking agencies to examine qualifying insured depository institutions with under $6 billion in total assets not less than once during each 18-month period, and for other purposes."