lustrative example of a situation where end users were unable to access funds in custodial deposit accounts at banks. Voyager claimed to hold customers’ U.S. dollar funds at an insured bank and falsely represented that customer funds held with Voyager were insured with the FDIC up to $250,000 in the event of Voyager’s failure, not just the failure of the bank where Voyager deposited customer funds. SeeFDIC and Federal Reserve Joint Letter to Voyager Digital Regarding Potential Violations of Section 18(a)(4) of the Federal Deposit Insurance Act (July 28, 2022). After Voyager declared bankruptcy, many customers were unable to access the funds in their accounts for a period of time. The Voyager situation, and several others like it, were key events that led the FDIC to revise its rules for deposit insurance misrepresentation in December 2023. SeeFDIC Official Signs and Advertising Requirements, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC’s Name or Logo, 89 Fed. Reg. 3504 (Jan. 18, 2024).[] The Proposal defines “beneficial owner” as “a person or entity that owns, under applicable law, the funds in a custodial deposit account.” The Proposal’s definition of “beneficial owner” is not intended to incorporate the meaning of “beneficial owner” as that term may be used for purposes of other laws, such as the Bank Secrecy Act. The Proposal’s definition of “beneficial owner” should not be confused with other definitions of the same term, including those associated with rules implemented by the Financial Crimes Enforcement Network, such as the Corporate Transparency Act or the Customer Due Diligence rule, which relate to beneficial owners of legal entities rather than accounts.[] See 12 U.S.C. § 1813(l) (defining “deposit”).[] This proposed exemption could leave unaddressed challenges for end users posed by the Synapse bankruptcy. As previously noted, Synapse developed a cash management program through its subsidiary, Synapse Brokerage LLC, a licensed broker-dealer, which opene

d controls for third-party relationships and deposit functions, with particular focus on fintech relationships involving deposit account generation. For example, as recommended by the agencies, banks could conduct, internally or with the assistance of counsel and/or others, risk assessments relating to third-party oversight and deposit activities. We will continue to monitor activity in this rapidly evolving regulatory environment._______________ Board of Governors of the Federal Reserve System, “Joint Statement on Banks’ Arrangements With Third Parties To Deliver Bank Deposit Products and Services” (July 25, 2024). Request for Information on Bank-Fintech Arrangements Involving Banking Products and Services Distributed to Consumers and Businesses, 89 Fed. Reg. 61,577 (July 31, 2024). Joint Statement at 2-4.Id. at 2.Id.Id. at 3-4.Id. at 4.Id. FDIC Official Signs and Advertising Requirements, False Advertising, Misrepresentation of Insured Status, and Misuse of the FDIC’s Name or Logo, 89 Fed. Reg. 3504 (Jan. 18, 2024). FDIC press release “FDIC Demands Three Companies Cease Making False or Misleading Representations About Deposit Insurance” (March 19, 2024); FDIC press release “FDIC Demands Five Entities Cease Making False or Misleading Representations About Deposit Insurance” (Jan. 19, 2024); FDIC press release “FDIC Demands Unbanked, Inc. Cease Making False or Misleading Representations About Deposit Insurance” (Aug. 4, 2023).See, e.g., Interagency Guidance on Third-Party Relationships: Risk Management, 88 Fed. Reg. 37,920 (June 9, 2023). Joint Statement at 5-6.Id. at 6-7.Id. at 7.Id.Id. at 8.Letter from the American Bankers Association, et al. to the FDIC, Office of the Comptroller of the Currency and Board of Governors of the Federal Reserve System (Aug. 9, 2024). FDIC, Notice of Proposed Rulemaking, Unsafe and Unsound Banking Practices: Brokered Deposits Restrictions(July 30, 2024).See, e.g., CFPB, Fees for Instantaneously Declined Transactions, 89 FR 6031 (Jan. 31, 2024); CFPB, Supervisory Hig