Good morning. U.S. lawyers on Tuesday voted to adopt a revised rule that imposes a more explicit obligation to vet potential clients, reports Risk & Compliance Journal's Dylan Tokar, as part of an effort to quell concerns about the use of lawyers to facilitate money-laundering and other financial crimes.

• The vote: In a 216-102 vote at its annual meeting in Denver, the American Bar Association approved amendments to its rules of professional conduct that require lawyers to assess the “facts and circumstances” of potentially representing a client. Under the new rules, lawyers would also be required to halt work for any client that wishes to use their services to commit a crime.
   
• The context: The rule change comes amid pressure on the ABA to address what the group has said is the unwitting involvement of lawyers in a number of high-profile financial scandals. By changing its rules to address those concerns, supporters of the amendments passed Tuesday said they hope to forestall more stringent regulation.
   
• Threats of further regulation: In a speech ahead of Tuesday’s vote, Kevin Shepherd, the ABA’s treasurer, said the U.S. Treasury Department recently had informed him that failure to pass the resolution would cause the agency to take immediate regulatory action as well as to lobby for legislation imposing additional obligations on lawyers. “It’s simple political reality, and we ignore it at our peril,” Shepherd said.

Wells Fargo, BNP Paribas, others to pay $555 million in fines for use of messaging apps.

Several financial firms, including Wells Fargo and BNP Paribas, have agreed to pay about $555 million in total to two regulators, admitting that their employees used banned messaging applications that broke record-keeping rules.

As part of the settlements, reports Risk & Compliance Journal's Mengqi Sun, the firms also agreed to retain independent compliance consultants to review their policies and procedures related to the retention of electronic communications on personal devices as well as their respective frameworks for addressing their employees’ breaches of these policies.

Crackdown by regulators. The fines, which many of the firms had already disclosed to shareholders, are part of an industrywide sweep by U.S. regulators amid wider efforts to push broker-dealers and investment advisers to comply with record-keeping requirements.

Zoom, other remote-work champions call employees back to the office.

Some of the pioneers of the work-from-home movement are ordering employees back to the office for at least part of the week, in another sign the era of remote work is evolving.

More calls to 'return to work.' Among the latest to reverse course is the technology company Zoom, maker of the videoconferencing software that became ubiquitous during the pandemic. Executives in recent days have told employees that they see value in staffers working with their teams in-person, and that the company would begin requiring people who live near its offices to work on-site two days a week.

Dentons, one of the world's largest law firms, is distancing itself from a Chinese affiliate amid increased regulatory pressure and an anti-espionage crackdown by China's government.

The firm on Monday informed clients that Beijing Dacheng Law Offices, previously part of the Dentons Group, would now operate as an independent legal entity, according to a note seen by The Wall Street Journal. Dentons will continue to maintain its Hong Kong practice, the firm added.

• Conservative legal activists successfully challenged the use of affirmative action by universities. Now they are going after diversity initiatives widely deployed across American corporations. Some companies are already reconsidering their efforts.
   
• China released draft rules on Tuesday to curb uses of facial recognition, taking a step to limit the expansion of a polarizing technology while leaving large carve-outs for national-security-related uses.
   
• A New York state judge temporarily blocked retail licensing for cannabis, in another blow to the state’s nascent recreational marijuana industry.
   
• The judge overseeing the criminal case against Donald Trump alleging he conspired to undo the 2020 election results set a court hearing for Friday morning to resolve disputes over what information the former president and his legal team can access and potentially publicly expose.
   
• Shortly after the invasion of Ukraine, Bacardi said it had paused exports to Russia. Since then, the liquor company has sent millions of dollars of products to the country and has been advertising for new employees.
   
• The U.S. is set to ban private-equity and venture-capital investments in some Chinese technology companies under an executive order the Biden administration will release Wednesday, escalating Washington’s efforts to prevent Beijing from developing cutting-edge technology for its military.

Bank stocks slide after Moody’s downgrade.

Bank stocks fell Tuesday after Moody’s Investors Service downgraded 10 regional banks, renewing concerns about the health of the sector amid higher interest rates and recent failures.

The reaction suggests the sector remains vulnerable to the problems that stirred a panic this spring after the failures of several midsize lenders: devalued bonds, jittery investors, deposit withdrawals and higher costs.

China slips into deflation in warning sign for world economy.

Tepid consumer demand and rising economic concerns in the world’s second-largest economy have tipped China into deflationary territory for the first time in two years, adding pressure on Beijing to act more aggressively to avoid a deepening economic malaise.

Instead of experiencing a surge in prices after the lifting of Covid-19 pandemic curbs late last year, China is suffering an unusual bout of falling prices for a range of goods, from commodities such as steel and coal to daily essentials and consumer products such as vegetables and home appliances.

• Chinese Exports Fall at Steepest Pace Since February 2020
• Country Garden, China’s Largest Developer, Sinks Into Debt Crisis

• At least two people died as powerful storms ripped through the Eastern U.S. Monday, resulting in hundreds of thousands of power outages and disrupting air travel.
   
• The Latin American countries that share the Amazon rainforest embarked on a two-day meeting Tuesday in the Brazilian jungle city of Belém with an aim to halt the deforestation that many scientists blame for accelerating climate change.
   
• China’s top diplomat assured Russia that Beijing hasn’t wavered in its stance on the Ukraine war, right after a Chinese envoy joined a multilateral forum—which excluded Moscow—to discuss ways to end the conflict.

• The Wall Street Journal looked at some of the cities around the world that are among countless that have been affected in different ways by rising temperatures.
   
• ESPN agreed to a $2 billion deal to allow its brand to be used in Penn Entertainment’s online sportsbook, a strategic turn for both companies as they try to tap into the sports-betting sector’s growth.
   
• A 5-4 Supreme Court said Tuesday that federal regulation of so-called ghost guns would stand while the Biden administration appeals lower-court orders finding that do-it-yourself firearm kits weren’t covered by the principal federal weapons law, the Gun Control Act.
   
• More than a week into the August recess, some lawmakers are diving back into their efforts to fund the government for fiscal 2024, seeking to gain a negotiating edge when Congress returns in September.
   
• Newly delivered, American-made cluster munitions have given fresh impetus to Ukraine’s campaign to retake territory captured by Russia, after weeks of little progress.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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