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February 17, 2019Today's Top Risk News + Analysis From the Editors at RANE
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01
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LEGAL, REGULATORY + COMPLIANCE
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What Can the Country Expect from Trump’s New U.S. Attorney General?

The Senate approved William Barr as the next attorney general on Thursday and the pressing question is what the country can expect from Jeff Sessions’ successor. NBC reports that one conservative analyst said he expects Barr to be more open-minded than the dogmatic Sessions. Barr previously served as attorney general under President H.W. Bush. Barr and Sessions are not identical in their views, according to John Malcolm, vice president of the Institute for Constitutional Government at the conservative Heritage Foundation. Questions about Barr’s plans have centered on special counsel Robert Mueller’s ongoing investigation into Russian meddling in the 2016 presidential election. Sessions angered President Donald Trump when he recused himself from overseeing the investigation and Barr has said he thought Sessions did the right thing. Barr is expected to take a hard line on immigration, just as he did in the first President Bush’s administration when he made it much harder for asylum-seekers to enter the U.S. He has supported tough-on-crime criminal justice policies but has indicated that he might soften on some of those views. He also has a more flexible view on marijuana legalization. Meanwhile, a former DOJ colleague called Barr a hands-on manager who will probably be interested in broad policy issues and the Justice Department’s efforts to combat gangs and the opioid crisis, the Washington Post reports.

READNBC , The Washington Post 
02
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LEGAL, REGULATORY + COMPLIANCE
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Expect Lots of Lawsuits if Trump Declares a National Emergency to Build His Wall

The only certainty if President Trump declares a national emergency to construct a wall on the country’s southern border is that there will be plenty of lawsuits from California to Congress. The Washington Post reports that suits will be filed in numerous jurisdictions. The pattern with previous lawsuits — many successful — brought against the Trump administration has been to file in the U.S. Court of Appeals for the Ninth Circuit on the West Coast, the U.S. District Court in Washington and possibly in New York. The Department of Justice has warned Trump that his action is likely to be blocked in the courts; his own counsel’s office warned him that declaring a national emergency carried a “high litigation risk.” Xavier Becerra, California’s attorney general and a likely litigant, said “Any crisis on our border is of President Trump’s own making. … We will do what we must to hold him accountable.” White House lawyers have told Trump he could reprogram money without calling an emergency, but a person familiar with the discussions said Trump is concerned there is not enough money to do that and that he is determined to declare an emergency partially out of fear of looking weak.

READThe Washington Post  
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03
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LEGAL, REGULATORY + COMPLIANCE
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CFPB Ready to Launch Controversial ‘Sandbox’ to Encourage Trial Disclosure Programs

The Consumer Financial Protection Bureau’s (CFPB) Office of Innovation is ramping up for the next stage of its proposal to create a “disclosure sandbox” intended to encourage trial disclosure programs. Compliance Week reports that the CFPB said that the program will be available to any entity overseen by the Bureau regardless of its categorization as FinTech, bank, credit union or otherwise. The proposed new policy includes multiple provisions intended to encourage companies to test new disclosures. The plan is not entirely new as the Dodd-Frank Act also had provisions to create legal protections for companies wishing to conduct trial disclosure programs. The comment process has been marked by controversy, with a coalition of 80 consumer, civil rights, legal services, labor, environmental and community groups expressing strong opposition because they believe the process enables companies to curry sympathy with calls for relief from “burdensome regulation” and possibly undermines critical protections. In a comment letter, 22 attorneys general (all Democrats) argue that the proposed policies would provide safe harbor for entities and industries trying to sidestep federal and state enforcement authorities.

READCompliance Week 
04
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BUSINESS INTELLIGENCE
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JP Morgan to Test ‘JPM Coin’ — First-Ever Bank-Backed Cryptocurrency

Although JP Morgan CEO Jamie Dimon has bashed bitcoin as a fraud, he and his managers have held that blockchain and regulated digital currencies hold promise. Now, CNBC reports, the lender will test that assessment by issuing the JPM Coin, a digital token created to be used for instant settlement between clients of the bank’s wholesale payments business. The trial represents the first real-world use of a digital currency by a major U.S. bank, though only a sliver of the $6 trillion JP Morgan moves around the world daily will initially be transmitted via cryptocurrency. The project anticipates a time when aspects of the essential underpinning of global capitalism, from cross-border payments to the issuance of corporate debt, transition to the blockchain. Only JP Morgan’s big institutional clients that have undergone regulatory checks will be able to use the tokens. Each JPM Coin is redeemable for $1 so the coin’s value should not fluctuate. It is expected that the coin can be used for international payments and securities transactions which can occur in real time, avoiding the time gap that accompanies wire transfers.

READCNBC 
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LEGAL, REGULATORY + COMPLIANCE
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Amazon Canceling Plans for NY HQ May Be Turning Point in Tax-Incentive Debate

Economists have warned against the financial shell game of tax incentives for corporations, cautioning that such enticements are little more than corporate giveaways that divert money from infrastructure, education and other concerns that matter more for a local economy. The New York Times reports that Amazon’s decision to cancel plans for a new headquarters in Long Island City validates critics of the subsidy arms race that has cities giving away the store in their attempt to lure corporations to their region. Separately, the Financial Times reported that Amazon’s decision to walk away from Long Island City indicates a tin ear to the public’s mood, as does its decision not to reopen the search. If Amazon had announced that it was moving the 25,000 jobs to a city that needed them more, such as Detroit, it might have ended up with a feather in its cap. Investors, employees and consumers have begun to look closely at what companies contribute to communities. Contrast Amazon’s antagonism to a Seattle tax that would have helped fund affordable housing with the kudos Microsoft collected when it announced a $500 million investment in affordable housing for Seattle.

READThe New York Times , Financial Times 
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06
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LEGAL, REGULATORY + COMPLIANCE
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EU Reaches Agreement on Rules to Govern Ecommerce, Search Engines and Online Platforms

The European Parliament, Council of the EU and Commission announced an accord on regulating the business environment of online platforms, TechCrunch reports.  The political agreement paves the way for the regulation to be adopted and published, probably later this year, and the rules to go into effect 12 months after that point. The new rules ban sudden and unexpected account suspensions and requires the platforms to provide clear reasons for any termination as well as possibilities for appeal. Terms and conditions must be written in plain, understandable language and be easily available. For search engines, the new rules focus on ranking transparency, which will make it harder for a dominant search player like Google to use its market power against rivals. The EC found in 2017 that Google had systematically given prominent placement to its own search comparison service and had demoted rival services in search results (findings that Google is appealing). The regulations are expected to change the marketplace, both in the way consumers are protected and also in the fairness with which businesses are dealt with.

READTechCrunch 
07
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BUSINESS INTELLIGENCE
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Questions About India’s Official Economic Data Prompt Calls for Independent Verification

A Mumbai-based think tank is calling for an independent body to vet official statistics after questions were raised about credibility in the nation’s data reporting. Bloomberg reports that the Center for Advanced Financial Research and Learning (CAFRAL) is concerned that economic growth and deficit assumptions in the government’s interim budget are subject to much debate and markets, agencies and foreign investors all making their own assumptions. The budget reflected Prime Minister Narendra Modi’s push to finance populist measures ahead of May’s national elections but was based on the assumption revenue will grow 14 percent year on year. History shows that India, with an aggregate fiscal deficit of close to 6.5 percent of GDP has failed to hit income targets in each of the past five fiscal years. CAFRAL estimates that the federal government’s budget deficit will probably be closer to 3.7 percent with the combined deficit including its states going over 7 percent. Concerns over missing deficit targets come amid questions over the reliability of India’s economic data. Adding an independent body to vet the governments numbers would go a long way in restoring credibility, CAFRAL’s director Amartya Lahiri says.

READBloomberg 
08
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GOVERNANCE
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Beijing Cracks Down on Black Market Foreign Currency Transactions

In an attempt to control capital flight and keep the yuan exchange rate stable, China is cracking down on individuals and corporations that buy or sell foreign currency on the black market. South China Morning Post reports that effective from the first of February, illegal foreign exchange trading will be a criminal offense and those involved will be charged with engaging in an illegal business operation. A cumulative transaction of $737,000 (5 million yuan) of illegal profits of $14,749 (100,000 yuan) would be deemed a “severe” offense, subject to up to five years in prison and a fine of up to five times the profits. “Extremely severe” violations, $3.69 million (25 million yuan) or $73,745 (500,000 yuan) would be subject to more than five years and a fine of up to five times the profits or confiscation of property. Punishment would be more severe if the violator had a criminal record or had refused to cooperate with authorities to trace illegal capital flows. Capital inflows have increased significantly in recent months as overseas investors have gained wider access to China’s equities and bond markets through the Hong Kong Connect programs.

READSouth China Morning Post 
09
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GOVERNANCE
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Though Companies Worry About Employee Retention, Most Don’t Plan to Raise Pay

A PayScale survey revealed that 66 percent of companies pointed to employee retention as a major concern, but 69 percent of companies said they only plan to raise base pay by 3 percent or less this year, just keeping pace with inflation. CFO reports that a majority of the companies planning on keeping pay at or close to current levels expressed concerns the economy might be headed toward a recession. Two thirds of companies said they will use bonuses to retain top performers and more than 40 percent said they gave increases of 10 percent or more in base pay for highly competitive jobs, such as positions in IT. In an interview with CNBC, Lydia Frank, vice president of content strategy at PayScale, said concern about a possible recession is making companies cautious with their compensation budgets, but a company that has retention concerns and is being overly cautious should keep in mind that employees have a lot of options. Some companies may offer more perks, such as paid family leave, more generous time off or the opportunity to work remotely, to help retain employees. “Benefits are easier to dial back or modify if a recession hits,” Frank said.

READCFO 
10
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LEGAL, REGULATORY + COMPLIANCE
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India’s Crackdown on eCommerce May Backfire on Smaller Indian Companies

India has been hard at it lately enacting sweeping restrictions in an attempt to curtail the power of tech giants like Facebook, Amazon and Twitter. However, Wired reports, India’s restrictive backlash could backfire, with potentially dire consequences for tech companies big and small operating there. Apar Gupta, executive director of the Internet Freedom Foundation, a digital-rights group, says an element of nationalism is creeping into India’s tech policy and the result has been a number of India-first tech policies that were rushed through the government through the executive notification process rather than seeking the more deliberative route of parliamentary approval. Developing reasonable, scalable tech policies with a feasible deployment strategy is difficult and the government’s proposed new rules could drastically weaken protections for internet “intermediaries” by effectively forcing platforms to censor content the government deems unlawful. Taking a page out of China’s rulebook, the new regulations also would require messaging services like WhatsApp to provide a backdoor for Indian authorities, which would weaken end-to-end encryption. India’s government could put the rules in effect as early as today, because the changes don’t require parliamentary approval.

READWired 
11
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CYBER + INFORMATION
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Healthcare Providers’ Failure to Protect Medical Records Proves a Boon to Identity Thieves

Despite the known fact that medical records are a treasure trove for identity thieves, many healthcare providers are leaving patients’ digital medical records vulnerable to being stolen and sold on the black market or the dark web. CBS reports that hackers have stolen millions of records, such as the breach at Anthem Insurance that exposed 78 million people and a hack at UCLA health that exposed more than 4 million patient records. Despite that, a 2017 survey of health care providers found that only 16 percent report having a robust, fully functional cybersecurity program. According to Protenus, a firm that helps health care companies secure their data, 222 hacking incidents involving more than 11 million patient records took place last year, an almost-25 percent increase from 2017. Security experts recommend that individuals request and keep copies of their medical files to make it easier to clear up confusion that might arise if their records are altered in the future. Social Security numbers sell for $1 while credit card info increases to $110. However, consumer credit reporting agency Experian reports full medical records can command up to $1,000 due to the data they contain including date of birth and Social Security number, among other information.

READCBS 
12
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CYBER + INFORMATION
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Groundbreaking AI Fake Text Generator May Have to Stay Behind Closed Doors

A nonprofit research company backed by Elon Musk has created a new artificial intelligence system that can write believable news stories and works of fiction — “deepfakes for text” — may be too effective to be released publicly. The Guardian reports that OpenAI fears the risk of malicious use of its new AI model, called GPT2, is so high that the company is breaking from its normal practice of releasing full research to the public while it sorts out the ramifications of its breakthrough technology. GPT2 is a text generator that pushes the boundaries of what has been thought possible, both in its quality and the variety of its potential uses. The system is able to write plausible passages that match in both style and subject what has been fed into it without showing any of the quirks that mark previous AI systems. GPT2 is groundbreaking in its sheer size, using models 12 times bigger and a dataset 15 times bigger and much broader than previous state-of-the-art AI. It trained on a dataset containing about 10 million articles trawled from the social news site Reddit — 40 gigabytes of text, or enough to store 35,000 copies of Moby Dick.

READThe Guardian 
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