Following their success in the midterm elections, Democrats are expected to increase investigations of financial institutions. Rep. Maxine Waters, D-Calif., a staunch proponent of increased bank regulation, megabank accountability, and consumer protection, is now the majority chair of the House Financial Services Committee, a position that comes with significant subpoena and investigatory powers. In addition, Rep. Elijah Cummings, D-Md., who spent the past two years trying to gather information about possible corruption in the Trump administration, now chairs the House Oversight and Reform Committee (formerly, the House Committee on Oversight and Government Reform), giving Democrats broad investigatory authority. Rep. Cummings is expected to launch numerous investigations of government agencies and their activities, including relationships with private sector actors. Indeed, on Jan. 2, 2019, Rep. Cummings stated that the committee’s name change “better reflect[s] our true jurisdiction, which covers both government and the private sector.” With these changes, megabanks that have been implicated in financial misconduct, and financial institutions with ties to President Trump and those around him can expect to be the subject of congressional investigations.
The anticipated directional shift in focus for these key House oversight committees signals that banks of all sizes, but especially large financial institutions, may be targets of future congressional investigations or face hearings and subpoenas aimed at uncovering potentially illicit financial dealings, consumer financial protection violations, or unsound banking practices. Now is a good time for banks to identify and address, where necessary, their perceived vulnerabilities so they are prepared should they undergo a congressional investigation.
Banks should consider proactively assessing their risk and reviewing likely areas of focus of the new Democratic-majority House. This includes identifying and assessing any public information that implicates them in consumer fraud, money laundering, or other illicit activity; evaluating the effectiveness of their policies and procedures relating to potential areas of inquiries; and reviewing high-risk customers, customer relationships, and business products for potential vulnerabilities and indicators of connections with Russian corruption influences and kleptocrats. Banks should also consider developing a response plan and take steps to remediate any issues that are identified.