JBIPL’s 2017 ‘Banking Law’ symposium addresses cyber security, FinTech, community banking

Photo of JBIPL 'Banking Law: Current and Future Issues' symposium 2017 presenters and editors

JBIPL 'Banking Law: Current and Future Issues' symposium 2017 presenters and editors

The Journal of Business and Intellectual Property Law hosted a symposium, “Banking Law: Current and Future Issues,” which addressed themes including cyber security, FinTech, community banking, among others, on Friday, Feb. 10, 2017.

Dean Suzanne Reynolds (JD ‘77) welcomed the esteemed panelists and audience members and congratulated JBIPL for having the most followed law school blog.

“We’re going to look at a wonderful collection of hot topics — cyber security, data, the role of in-house counsel, whether there is a life in the hereafter and present for community banks and, finally, look at consumer protections in the Trump era,” she said.

Cyber Security: Potential threats and what constitutes a cyber breach

Panelists Thomas Bentz, Chris Swecker (JD ‘81) and Elizabeth Johnson discussed the importance of cyber security in a world of new technology.

“Cyber crime is the most pervasive of this millennium,” Swecker said. “Nothing that touches the internet is secure.”

Political hackers, or “hacktivists,” are state-sponsored threats or cyber terrorists driven by a specific issue.

According to Bentz, a partner at Holland & Knight LLP, insurance companies don’t cover costs before you notify the firm of a breach.

“Most policies are based on the date you buy them and moving forward,” Bentz said. “But what do you do if you have been hacked for two years prior to buying the insurance, but it won’t be covered?”

Because of this policy, insurance brokers have a hard time keeping CEOs properly insured. By hiring a law firm to get involved, errors and admissions coverage become ambiguous.

“The component of which policy comes first is something insurance companies haven’t figured out yet,” Bentz said.

FinTech: Using technology for data processing and regulatory compliance

The following panel composed of John Douglas, Lawrence Baxter, Erin Fonte, Doug Speight and Lee Reiners addressed FinTech and its ability to automate finance. The conversation discussed blockchain infrastructure and the FinTech Charter in relation to banking.

“If you had told me five years ago that payment would be a hot and sexy area, I would’ve been like ‘What?’” said Fonte, a member of Dykema Cox Smith. “My practice pre-smartphone and post-smartphone have changed dramatically.”

Today, Fonte supports companies through the convergence of tech platforms. A third of their practice is retailers who are navigating the transition from traditional payments to electronic payments like PayPal or Venmo.

“What is the government’s role in fostering innovation while maintaining safe and sound banking transitions?” said Reiners, director of Global Financial Markets. “Unfortunately, we moved a little slow, but at least there was recognition that this is something they can no longer ignore. We’re still behind countries like United Kingdom, Australia and Singapore, but both sides are adjusting to the growing pains.”

Automation manifests in companies’ workforces as well. The implementation of IBM’s Watson, a cognitive system with learning capabilities, proposes a threat for job security.

“If you take Watson in its almost infinite capacity, you can replace a substantial amount of employees,” said Douglas, partner at Davis, Polk & Wardwell LLP. “Watson becomes a trusted entity for the big banks. There are interesting implications for employment and ways banks conduct interest.”

The emergence of blockchain infrastructure is another method of automating finance. The crypto currencies, like bitcoin, rely on this groundwork for success. Bitcoin allows users to exchange goods without the risk of being hacked.

“Blockchain is as big of a revolution as the Internet itself,” said Baxter, a professor at Duke Law School.

Life of an In-House Counsel

Panelists Todd Stillerman (BA ‘94), Derrick Tharpe and Knut Nodeland discussed the realities of working for a corporation. The in-house counsels serve a national client base and deal with different institutions.

“We are regulated by the OCC and are under constant examination,” said Nodeland, the assistant general counsel and senior vice president for Bank of America. “Information security is an interesting space because it’s constantly evolving. [Regulators] are concerned with safe and soundness of the bank and of the industry.”

The panelists expressed the negative reaction of clients given the increased regulations.

“They don’t understand it,” said Tharpe, vice president and senior counsel at Wells Fargo Law Department. “There are strict requirements within one bank and different departments. There’s no consistency with OCC and industries.”

“We want to comply, and we do our best to comply,” Nodeland said. “But sometimes we don’t know what that means.”

Community Banking: Can this model survive?

The three diverse panelists — Todd Eveson, Katie Brosken and Arthur Wilmarth — shared varied perspectives on community banking. They all, however, agreed the banks are necessary component to the community.

“Community banks are the lifeblood of the community,” said Brosken, deputy commissioner of Banks for Legal Affairs in the North Carolina Office of the Commissioner of Banks. “These community banks may touch all of your lives.”

The OCC’s proposal to make special purpose national bank charters available to financial technology companies failed to address business model and public policy concerns.

“The only authority the cite is their own rule that was put into place 13 years ago,” said Wilmarth, a professor at George Washington University Law School. “People responded negatively, and I don’t think they have the authority to do it.”

Wilmarth argues that just as Millennials are favoring organic stores over supermarkets, the same model is demonstrated in community banks.

“Community banking is here to stay,” said Eveson,an attorney at Wyrick Robbins Yates & Ponton LLP. “But business models and scales are changing.”

Consumer Protection: The future under the Trump Administration

The final panel of the afternoon discussed developing litigation regarding the Consumer Financial Protection Bureau. Mark Huffman, Don Lampe and Carlene McNulty delved into the Consumer Financial Protection Bureau’s successes and conflicts it encounters.

“Now we’re at sort of a fork in the road where we saw this flowering from the creation of the Consumer Financial Protection Bureau,” said Lampe, a partner at Morrison Foerster LLP. “We saw, in effect, our whole practice revolutionized in Washington as a result of this bureau.”

Dodd-Frank created the Consumer Financial Protection Bureau in July 2010, giving it the powers of rule making, supervision and enforcement. Over the years this has been a positive advancement, but it will be weakened under this administration.

“We live in an over-regulated way in all sectors of the economy,” Lampe said. “Really, in all sectors of life in this country.”