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Education

A brighter future for and security; enacting federal data security and breach
notification laws; promoting digital legal identity initia-
financial services tives; and continuing to incorporate cloud technologies
and artificial intelligence into financial services.

The chapter also recommends reform of outdated
consumer communication rules, adopted during the era of
mail order/telephone order transactions, to address digital
communications, the reassigned numbers database and
consumer preferences.
By Robert J. McCarthy It additionally provides an overview of data aggregation
Global Legal Law Firm and questions about benefits versus risks to consumers.
It recommends new disclosure rules, including offering
n July 31, 2018, the U.S. Department consumers a simpler way to limit, suspend or revoke
of the Treasury released a report titled A prior data authorizations. The chapter also discusses how
Financial System That Creates Economic machine learning and artificial intelligence can provide
O Opportunities: Nonbank Financials, Fintech, significant benefits for the financial services industry and
and Innovation. It was prepared in response to the Core become a competitive advantage for U.S. firms.
Principles set forth in President Trump's Executive Order
13772, dated Feb. 3, 2017. The order lays out core prin- Disparate regulatory systems
ciples with goals to empower Americans to build wealth,
foster economic growth and create a more efficient regula- The report's second chapter discusses the long-standing
tory scheme. goal of harmonizing state and federal financial regulatory
systems. It urges state regulators to ease challenges created
Most people support efficiency and economic growth. by state-specific licensing requirements by adopting
Determining how to accomplish those goals is the real uniform laws and coordinating examinations whenever
dilemma. The 222-page report is full of recommendations possible.
that sound great, but lead to as many questions as answers.
No industry suffers more from fragmented state licensing
requirements than money transmitters (nonbank firms
The current regulation of fintech companies is complicated
and includes many layers and multiple agencies. The report that transfer or receive funds on behalf of others).
recognizes the regulatory framework is burdensome and For instance, all money transmitters with nationwide
does not foster an environment where innovation can footprints must be licensed by and subject to examinations
thrive. The Treasury drafted dozens of recommendations in every state where they operate. Plus, definitions of
designed to promote economic growth consistent with the money transmitters and their licensing requirements can
Trump Administration's Core Principles. vary significantly from state to state.

Any business in the money transmitter category must be
Those recommendations fall into the following categories:
adapting regulatory approaches to changes in the pleased with the Treasury's threat of congressional action
aggregation, sharing and use of consumer financial data; if the states cannot harmonize licensing requirements
aligning the regulatory framework to combat unnecessary within the next three years. The real question involves the
regulatory fragmentation; updating industry-specific extent of proposed harmonization. For now, hope is on the
regulations; and advocating regulation that enable horizon for money transmitters, lenders, loan servicers
responsible experimentation and advances American and others subject to individual state licensing.
interests abroad.
One immediate impact of the report involves the Office
Data collection of the Comptroller of the Currency's determination that
fintech companies engaging in the business of banking,
The first chapter of the report addresses the dramatic in- without accepting deposits, may now apply for special
crease in the collection and use of data in the financial purpose national bank charters.
services industry. Recognizing the regulatory system
must adapt to realize the benefits of data evolution, the By opening the doors to fintech companies, the OCC
Treasury makes recommendations designed to promote recognizes that many technological innovations that
economic growth and improve consumer access to data, have revolutionized the delivery of financial products
while also limiting unauthorized third-party usage. and services have not come from traditional banks.
Furthermore, the Treasury recommends that the Federal
Some of those recommendations include: removing legal Reserve, Federal Deposit Insurance Corp. and OCC
and regulatory uncertainties holding back financial ser- coordinate regulatory oversight to enable traditional
vices companies and data aggregators; coordinating with banks to develop relationships with third-party service
the private sector to develop solutions for data sharing providers, many of whom are at the forefront of innovation.
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