What changed in this filing

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Item 1. Business

2022-02-11 compared with 2021-02-12 · 162 added, 147 removed, 311 unchanged (50% of the section changed)

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We are a leader in providing credit and charge cards to consumers, small businesses, mid-sized companies and large corporations around the world.

American Express ® cards issued by American Express as well as by third-party banks and other institutions on the American Express network permit Card Members to charge purchases of goods and services at the millions of merchants around the world that accept cards bearing our logo.

Our various products and services are sold globally to diverse customer groups through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party vendors and business partners, direct mail, telephone, in-house sales teams and direct response advertising.

Business travel-related services are offered through our non-consolidated joint venture, American Express Global Business Travel (the GBT JV).

American Express ® cards issued by us, as well as by third-party banks and other institutions on the American Express network, can be used by Card Members to charge purchases at the millions of merchants around the world that accept cards bearing our logo.

Our various products and services are sold globally to diverse customer groups through various channels, including mobile and online applications, affiliate marketing, customer referral programs, third-party service providers and business partners, direct mail, telephone, in-house sales teams and direct response advertising.

We were founded in 1850 as a joint stock association and were incorporated in 1965 as a New York corporation.

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Our businesses are global in scope and function together to form our end-to-end integrated payments platform, which we believe is a differentiator that underpins our business model.

The COVID-19 pandemic has brought unprecedented challenges to businesses and economies around the world.

While our business was significantly impacted by the pandemic in 2020 as further described in this report, we believe our progress in managing through it confirms the resilience of our differentiated business model.

While our business was significantly impacted by the COVID-19 pandemic in 2020, we believe our growth momentum through 2021 strengthens our focus on our strategic imperatives and the resilience of our differentiated business model.

For further information about our reportable operating segments, please see “Business Segment Results of Operations” under “MD&A.”

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• Using incentives to drive spending on our various card products and engender loyal Card Members, including our Membership Rewards ® program, cash-back reward features and participation in loyalty programs sponsored by our cobrand and other partners

• Providing digital and mobile services and an array of benefits and experiences across card products, such as airport lounge access and other travel and lifestyle benefits, which we believe are difficult for others to replicate and help increase Card Member engagement

• Providing digital and mobile services and an array of benefits and experiences across card products, such as airport lounge access, dining experiences and other travel and lifestyle benefits, which we believe are difficult for others to replicate and help increase Card Member engagement

• Creating world-class service experiences by delivering exceptional customer care

• Developing a wide range of partner relationships, including with other corporations and institutions that sponsor certain of our cards under cobrand arrangements and provide benefits and services to our Card Members

During 2020, we enhanced our value propositions on many of our card products, including adjusting our rewards programs and adding limited time offers and statement credits in categories that are relevant in the current environment, such as wireless, streaming services, business essentials and food delivery.

We also created a Customer Pandemic Relief Program to provide short-term support for customers impacted by COVID-19, and we enhanced and expanded our longer-term Financial Relief Program for Card Members who need additional financial assistance during this time.

Additionally, we participated in the U.S.

Small Business Administration Paycheck Protection Program (PPP), designed to provide small businesses with support to cover payroll and certain other expenses.

For the year ended December 31, 2020, worldwide proprietary billed business (spending on American Express cards issued by us) was $870.7 billion and at December 31, 2020, we had 68.9 million proprietary cards-in-force worldwide.

Over the last several years, we have focused on broadening the appeal of our products to attract new customers, particularly Millennial and Gen Z customers, as well as expanding our position with small and mid-sized enterprise (SME) customers by providing more ways to help them manage and grow their businesses.

During 2020, we enhanced our value propositions on many of our products, including adjusting our rewards programs and adding limited time offers and statement credits in categories that were relevant to how customer spending behaviors were changing, such as wireless telephone services, streaming services, business essentials and food delivery.

We also enhanced and expanded our financial relief programs to assist our customers who faced financial hardships.

As the pandemic continued, we made the decision to increase investments to drive customer acquisition, engagement and retention.

These initiatives have driven retention and satisfaction metrics higher than pre-pandemic levels.

During 2021, we relaunched our consumer Platinum Card and Business Platinum Card in the United States and introduced our first business checking account product and new digital capabilities, in part resulting from the Kabbage technology platform we acquired in 2020.

For the year ended December 31, 2021, worldwide billed business (spending on American Express cards issued by us) was $1.1 trillion and at December 31, 2021, we had 71.4 million proprietary cards-in-force worldwide.

Merchant Acquiring Business

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GMNS also provides fraud-prevention tools, marketing solutions, data analytics and other programs and services to merchants and other partners that leverage the capabilities of our integrated payments platform.

During 2020, we adjusted certain policies to back our merchant partners in the current environment, including raising contactless transaction thresholds and reminding them that we do not require Card Members’ signatures at the point of sale.

We also launched our largest-ever Shop Small campaign to support small businesses around the world, which have been significantly impacted by the pandemic.

During the pandemic, we increased our investments in our Shop Small campaigns to support small businesses around the world, created a Stand for Small coalition and supported minority-owned small businesses in the United States.

We launched debit capabilities on the American Express network and in 2021 introduced our first-ever proprietary debit card in connection with the business checking account product mentioned above.

Card Network Business

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These network partners are licensed to issue local currency American Express-branded cards in their countries and/or serve as the merchant acquirer for local merchants on our network.

During 2020, our joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company, received approval from the People’s Bank of China for a network clearing license and began processing transactions in mainland China.

For the year ended December 31, 2020, worldwide network services billed business (spending on American Express cards issued by third parties) was $139.9 billion and at December 31, 2020, we had 43.1 million cards-in-force issued by third parties worldwide.

During 2021, we continued to grow our business in China through our joint venture with Lianlian DigiTech Co., Ltd, a Chinese fintech services company.

For the year ended December 31, 2021, worldwide network services processed volume (spending on American Express cards issued by third parties) was $194.4 billion and at December 31, 2021, we had 50.3 million cards-in-force issued by third parties worldwide.

Diverse Customer Base and Global Footprint

Our broad and diverse customer base spans consumers, small businesses, mid-sized companies and large corporations around the world.

The following charts provide a summary of our diverse set of customers and broad geographic footprint based on billed business volumes:

The following charts provide a summary of our diverse set of customers and broad geographic footprint based on worldwide network volumes:

Partners and Relationships

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Delta Air Lines is our largest strategic partner.

Our relationships with, and revenues and expenses related to, Delta are significant and represent a significant source of value for our Card Members.

We issue cards under cobrand arrangements with Delta and the Delta cobrand portfolio represented approximately 9 percent of our worldwide billed business and approximately 21 percent of worldwide Card Member loans as of December 31, 2020.

Our relationships with, and revenues and expenses related to, Delta are significant and represent an important source of value for our Card Members.

We issue cards under cobrand arrangements with Delta and the Delta cobrand portfolio represented approximately 9 percent of worldwide network volumes and approximately 21 percent of worldwide Card Member loans as of December 31, 2021.

The Delta cobrand portfolio generates fee revenue and interest income from Card Members and discount revenue from Delta and other merchants for spending on Delta cobrand cards.

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We invest heavily in managing, marketing, promoting and protecting our brand, including through the delivery of our products and services in a manner consistent with our brand promise.

The American Express brand is consistently ranked as one of the most valuable brands in the world.

The American Express brand is ranked among the most valuable brands in the world.

We place significant importance on trademarks, service marks and patents, and seek to secure our intellectual property rights around the world.

We aim to provide the world’s best customer experience every day and our reputation for world-class service has been recognized by numerous awards over the years.

Our customer care professionals and partners treat servicing interactions as an opportunity to bring the brand to life for our customers, add meaningful value and deepen relationships.

Our customer care professionals, travel consultants and partners treat servicing interactions as an opportunity to bring the brand to life for our customers, add meaningful value and deepen relationships.

Our Business Strategies

Our framework for managing through the pandemic and the challenging economic environment is built on four principles:

supporting our colleagues and winning as a team;

protecting our customers and our brand;

structuring the company for growth in the future;

and remaining financially strong.

We remain focused on what we can control in the short term while identifying opportunities across our businesses to position ourselves for growth in the longer term.

And we seek to grow our business over the longer term by focusing on four strategic imperatives:

During 2021, we focused on investing to rebuild growth momentum by firing up our core business, scaling next-horizon opportunities and continuing to retain financial flexibility.

Over the longer term, we seek to grow our business by focusing on four strategic imperatives:

First, we aim to expand our leadership in the premium consumer space by continuing to deliver membership benefits that span our customers’ everyday spending, borrowing, travel and lifestyle needs, expanding our roster of business partners around the globe and developing a range of experiences that attract high-spending customers.

Second, we seek to build on our strong position in commercial payments by evolving our card value propositions, further differentiating our corporate card and accounts payable expense management solutions and designing innovative products and features, including financing and supplier payment solutions for our business customers.

Second, we seek to build on our strong position in commercial payments by evolving our card value propositions, further differentiating our corporate card and accounts payable expense management solutions and designing innovative products and features, including financing, banking and payment solutions for our business customers.

Third, we are focused on strengthening our global network to provide unique value by continuing to help merchants navigate the convergence of online and offline commerce with fraud protection services, marketing insights and digital connections to higher-spending Card Members and continuing to work with our network partners to offer expanded products and services.

Finally, we want to continue to make American Express an essential part of our customers’ digital lives by developing more digital features, solutions and services, expanding our digital partnerships and making targeted acquisitions.

We also have an Environmental, Social and Governance (ESG) strategy that focuses on three pillars.

The Promoting Diversity, Equity and Inclusion (DE&I) pillar supports a diverse, equitable and inclusive workforce, marketplace and society.

The Building Financial Confidence pillar seeks to provide responsible, secure and transparent products and services to help people and businesses build financial resilience.

Finally, the Advancing Climate Solutions pillar focuses on enhancing our operations and capabilities to meet customer and community needs in the transition to a low-carbon future.

Our Colleagues

We are committed to delivering a great colleague experience every day, cultivating the best talent and developing new ways of working to unlock enterprise value.

We work to foster an inclusive and diverse culture and help our colleagues thrive both professionally and personally.

When we do, our colleagues are more engaged, committed, creative and effective in driving results.

We are committed to delivering a great colleague experience every day.

We work to foster an inclusive and diverse culture and help our colleagues grow in their careers and thrive both professionally and personally.

As a result, we believe our colleagues are more engaged, committed, creative and effective in driving results.

At the heart of our culture is what we call our Blue Box Values – a set of guiding principles that reflect who we are and what we stand for:

In 2020, we updated our Blue Box Values to be more explicit about our efforts to create an inclusive and diverse workforce:

We Back Our Customers We Embrace Diversity

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We Respect People We Support Our Communities

We take a holistic approach to serving our colleagues by offering them a variety of resources that support their physical, financial, emotional, social and overall well-being.

Throughout the pandemic, one of our top priorities has been to ensure our colleagues have the flexibility and resources they need to stay safe, healthy and productive.

As of December 31, 2021, we employed approximately 64,000 people, whom we refer to as colleagues, with approximately 22,000 colleagues in the United States and approximately 42,000 colleagues outside the United States.

To attract and retain the best talent, we continuously invest in programs, benefits and resources to foster the personal and professional growth of our colleagues.

We provide learning opportunities in many forms, including tools and guidance for maximizing learning on the job;

cross-border and cross-business unit assignments;

career coaching, mentoring, and professional networking;

rotation opportunities;

virtual learning sessions;

and formal classroom instruction.

We take a holistic approach to well-being, providing resources that address the physical, financial and emotional health of our colleagues.

Throughout the pandemic, one of our top priorities has been to ensure our colleagues have the flexibility and resources they need to stay safe, healthy and productive.

We conduct an annual Colleague Experience Survey to better understand our colleagues’ needs and overall experience at American Express and in 2021, 90 percent of colleagues who participated in the survey said they would recommend American Express as a great place to work.

Our 2020 annual company scorecard included talent retention and diversity representation goals to globally increase minority and women representation at management levels and retain our key talent.

As of December 31, 2020, female colleagues comprised 52 percent of our global workforce and Asian, Black/African American and Hispanic/Latinx people represented 19.7 percent, 12.0 percent and 13.0 percent, respectively, of our U.S.

Our 2021 annual company scorecard included talent retention and diversity representation goals to increase minority and women representation and retain our key talent.

While we experienced an increase in colleague attrition in 2021, our high potential and multi-year high performer retention rates met or exceeded our goals.

As of December 31, 2021, women represented 52.9 percent of our global workforce and Asian, Black/African American and Hispanic/Latinx people represented 19.5 percent, 13.3 percent and 13.8 percent, respectively, of our U.S.

workforce based on preliminary data for our 2021 U.S.

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These reviews consider several factors known to affect compensation, including role, level, tenure, performance and geography.

In the few instances where a review has found inconsistencies, we have made adjustments.

After making these adjustments, we believe we achieved 100 percent pay equity in 2020 for colleagues across genders globally and across races and ethnicities in the United States.

In the instances where a review has found inconsistencies, we have made adjustments.

After making these adjustments, we believe we maintained 100 percent pay equity in 2021 for colleagues across genders globally and across races and ethnicities in the United States.

Information About Our Executive Officers

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Each officer’s age is indicated by the number in parentheses next to his or her name.

BUCKMINSTER — Group President, Global Consumer Services Group

Buckminster (60) has been Group President, Global Consumer Services Group since February 2018.

BUCKMINSTER — Vice Chairman and Group President, Global Consumer Services Group

Buckminster (61) has been Vice Chairman since April 2021 and Group President, Global Consumer Services Group since February 2018.

Prior thereto, he had been President, Global Consumer Services Group since October 2015.

CAMPBELL — Chief Financial Officer

Campbell (60) has been Chief Financial Officer since August 2013.

GORDON — Chief Information Officer

Gordon (60) has been Chief Information Officer since September 2012.

CAMPBELL — Vice Chairman and Chief Financial Officer

Campbell (61) has been Vice Chairman since April 2021 and Chief Financial Officer since August 2013.

MONIQUE HERENA — Chief Colleague Experience Officer

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Herena joined American Express from BNY Mellon, where she served as the Chief Human Resources Officer and Senior Executive Vice President, Human Resources, Marketing and Communications since 2014.

RAYMOND JOABAR — Chief Risk Officer and President, Global Risk & Compliance

Joabar (55) has been Chief Risk Officer and President, Global Risk & Compliance since September 2019.

Prior thereto, he had been President of International Consumer Services and Global Travel and Lifestyle Services since February 2018.

He also served as Executive Vice President, Global Servicing Network from February 2016 to February 2018 and Executive Vice President, World Service from November 2015 to February 2016.

ANNA MARRS — President, Global Commercial Services

Marrs (47) has been President, Global Commercial Services since September 2018.

Marrs joined American Express from Standard Chartered Bank, where she served as Regional CEO, ASEAN and South Asia since November 2016 and CEO, Commercial and Private Banking since October 2015.

RAYMOND JOABAR — Group President, Global Merchant and Network Services

Joabar (56) has been Group President, Global Merchant and Network Services since April 2021.

Prior thereto, he had been President, Global Risk and Compliance and Chief Risk Officer since September 2019.

He also served as President of International Consumer Services and Global Travel and Lifestyle Services from February 2018 to September 2019 and as Executive Vice President, Global Servicing Network from February 2016 to February 2018.

ANNA MARRS — Group President, Global Commercial Services and Credit & Fraud Risk

Marrs (48) has been Group President, Global Commercial Services and Credit & Fraud Risk since April 2021.

Prior thereto, she had been President, Global Commercial Services since September 2018.

Marrs joined American Express from Standard Chartered Bank, where she served as Regional CEO, ASEAN and South Asia since November 2016.

DAVID NIGRO — Chief Risk Officer

Nigro (60) has been Chief Risk Officer since April 2021.

Prior thereto, he had been Executive Vice President and Chief Credit Officer, Global Consumer Services and Credit and Fraud Risk Capability since April 2018 and Executive Vice President and Chief Credit Officer, U.S.

Consumer Card Services since December 2013.

DENISE PICKETT — President, Global Services Group

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Prior thereto, she had been Chief Risk Officer and President, Global Risk, Banking & Compliance since February 2018 and President, U.S.

Consumer Services since October 2015.

Consumer Services from October 2015 to February 2018.

RAVI RADHAKRISHNAN — Chief Information Officer

Radhakrishnan (50) has been Chief Information Officer since January 2022.

Radhakrishnan joined American Express from Wells Fargo & Company, where he served as Chief Information Officer for the Commercial Banking and Corporate & Investment Banking businesses since May 2020.

Prior thereto, he had been Chief Information Officer, Wholesale, Wealth & Investment Management and Innovation from May 2019 to May 2020.

He also served as Enterprise Chief Information Officer from March 2017 to May 2019 and as Chief Information Officer, Wholesale Banking from October 2015 to March 2017.

ELIZABETH RUTLEDGE — Chief Marketing Officer

Rutledge (60) has been Chief Marketing Officer since February 2018.

Prior thereto, she had been Executive Vice President, Global Advertising & Media since February 2016 and Executive Vice President, Card Products & Benefits since May 2013.

Prior thereto, she had been Executive Vice President, Global Advertising & Media since February 2016.

SEEGER — Chief Legal Officer

Seeger (60) has been Chief Legal Officer since July 2014.

JENNIFER SKYLER — Chief Corporate Affairs Officer

Skyler (44) has been Chief Corporate Affairs Officer since October 2019.

Skyler joined American Express from The We Company, where she had been Chief Communications Officer from January 2018 to September 2019.

JENNIFER SKYLER — Corporate Affairs Officer

Skyler (45) has been Corporate Affairs Officer since October 2019.

Skyler joined American Express from WeWork, where she served as Chief Communications Officer from January 2018 to September 2019.

Prior thereto, she had been Global Head of Public Affairs from January 2016 to January 2018.

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Prior thereto, he had been Vice Chairman since July 2015.

ANRÉ WILLIAMS — Group President, Global Merchant and Network Services

Williams (55) has been Group President, Global Merchant and Network Services since February 2018.

Prior thereto, he had been President of Global Merchant Services and Loyalty since October 2015.

ANRÉ WILLIAMS — Group President, Enterprise Services

Williams (56) has been Group President, Enterprise Services since April 2021.

Prior thereto, he had been Group President, Global Merchant and Network Services since February 2018 and President of Global Merchant Services and Loyalty since October 2015.

Williams also serves as the Chief Executive Officer of American Express National Bank.

We compete in the global payments industry with card networks, issuers and acquirers, paper-based transactions (e.g., cash and checks), bank transfer models (e.g., wire transfers and Automated Clearing House, or ACH), as well as evolving and growing alternative mechanisms, systems and products that leverage new technologies, business models and customer relationships to create payment or financing solutions.

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We also encounter competition from businesses that issue private label cards, operate mobile wallets or extend credit.

We face intense competition for cobrand relationships, as both card issuer and network competitors have targeted key business partners with attractive value propositions.

We face intense competition in the premium space and for cobrand relationships, as both card issuer and network competitors have targeted high-spending customers and key business partners with attractive value propositions.

We also face competition for partners and other differentiated offerings, such as lounge space in U.S.

and global hub airports.

Our global card network competes in the global payments industry with other card networks, including, among others, China UnionPay, Visa, Mastercard, JCB, Discover and Diners Club International (which is owned by Discover).

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The principal competitive factors that affect the card-issuing, merchant and network businesses include:

• The features, value and quality of the products and services, including customer care, rewards programs, partnerships, benefits and digital and mobile services, and the costs associated with providing such features and services

• The features, value and quality of the products and services, including customer care, rewards programs, partnerships, travel and lifestyle-related benefits, and digital and mobile services, as well as the costs associated with providing such features and services

• Reputation and brand recognition

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• The security of cardholder, merchant and network partner information

Another aspect of competition is the dynamic and rapid growth of alternative payment and financing mechanisms, systems and products, which include payment aggregators, digital payment and electronic wallet platforms, point-of-sale lenders, real-time settlement and processing systems, financial technology companies, digital currencies developed by both governments and the private sector, blockchain and similar distributed ledger technologies, prepaid systems and gift cards, and systems linked to customer accounts or that provide payment solutions.

Another aspect of competition is the dynamic and rapid growth of alternative payment and financing mechanisms, systems and products, which include payment aggregators, digital payment and electronic wallet platforms, point-of-sale lenders and buy now, pay later products, real-time settlement and processing systems, financial technology companies, digital currencies developed by both central banks and the private sector, blockchain and similar distributed ledger technologies, prepaid systems and gift cards, and systems linked to customer accounts or that provide payment solutions.

Various competitors are integrating more financial services into their product offerings and competitors are seeking to attain the benefits of closed-loop, loyalty and rewards functionalities, such as ours.

In addition to the discussion in this section, see “ Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry ” in “Risk Factors” for further discussion of the potential impact of competition on our business, and “ Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition” and “ Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, substantial monetary damages and damage to our reputation and brand ” in “Risk Factors” for a discussion of the potential impact on our ability to compete effectively due to government regulations or if ongoing legal proceedings limit our ability to prevent merchants from engaging in various actions to discriminate against our card products.

In addition to the discussion in this section, see “ Our operating results may materially suffer because of substantial and increasingly intense competition worldwide in the payments industry ” in “Risk Factors” for further discussion of the potential impact of competition on our business, and “ Our business is subject to comprehensive government regulation and supervision, which could materially adversely affect our results of operations and financial condition” and “ Legal proceedings regarding provisions in our merchant contracts, including non-discrimination and honor-all-cards provisions, could have a material adverse effect on our business and result in additional litigation and/or arbitrations, changes to our merchant agreements and/or business practices, substantial monetary damages and damage to our reputation and brand ” in “Risk Factors” for a discussion of the potential impact on our ability to compete effectively due to government regulations or if ongoing legal proceedings limit our ability to prevent merchants from engaging in various actions to discriminate against our card products.

SUPERVISION AND REGULATION

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Governmental authorities have focused, and we believe will continue to focus, considerable attention on reviewing compliance by financial services firms with laws and regulations, and as a result, we continually work to evolve and improve our risk management framework, governance structures, practices and procedures.

Reviews to assess compliance with laws and regulations by governmental authorities, as well as our own internal reviews, have resulted in, and are likely to continue to result in, changes to our products, practices and procedures, restitution to our customers and increased costs related to regulatory oversight, supervision and examination.

Reviews by us and governmental authorities to assess compliance with laws and regulations, as well as our own internal reviews to assess compliance with internal policies, including errors or misconduct by colleagues or third parties or control failures, have resulted in, and are likely to continue to result in, changes to our products, practices and procedures, restitution to our customers and increased costs related to regulatory oversight, supervision and examination.

We have also been subject to regulatory actions and may continue to be the subject of such actions, including governmental inquiries, investigations, enforcement proceedings and the imposition of fines or civil money penalties, in the event of noncompliance or alleged noncompliance with laws or regulations.

External publicity concerning investigations can increase the scope and scale of those investigations and lead to further regulatory inquiries.

In addition, legislators and regulators in various countries in which we operate have focused on the offering of consumer financial products and the operation of payment networks, resulting in changes to certain practices or pricing of card issuers, merchant acquirers and payment networks, and, in some cases, the establishment of broad and ongoing regulatory oversight regimes.

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Financial Regulatory Reform

In October 2019, the U.S.

federal bank regulatory agencies finalized rules that tailor the application of the enhanced prudential standards to bank holding companies and depository institutions (the Tailoring Rules) pursuant to the amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd Frank) introduced by the Economic Growth, Regulatory Relief, and Consumer Protection Act.

The Tailoring Rules assign each U.S.

bank holding company with $100 billion or more in total consolidated assets, as well as its bank subsidiaries, to one of four categories based on its status as a U.S.

The Company is subject to the U.S.

federal bank regulatory agencies' rules that tailor the application of enhanced prudential standards to bank holding companies and depository institutions with $100 billion or more in total consolidated assets.

Under these rules, each bank holding company, as well as its bank subsidiaries, is assigned to one of four categories based on its status as a U.S.

global systemically important banking organization and five other risk-based indicators:

(i) size, (ii) cross-jurisdictional activity, (iii) non-bank assets, (iv) off-balance sheet exposure, and (v) weighted short-term wholesale funding.

Under the Tailoring Rules, the Company (and, pursuant to the Tailoring Rules, its depository institution subsidiary, AENB) is subject to Category IV standards.

Because a firm’s categorization under the Tailoring Rules is determined by, and can change over time dependent upon, how the firm measures against the risk-based indicator thresholds, we are required to monitor and periodically report these risk-based indicators and there can be no assurance that the Company will continue to be a Category IV firm in the future.

(i) total assets, (ii) cross-jurisdictional activity, (iii) non-bank assets, (iv) off-balance sheet exposure, and (v) weighted short-term wholesale funding.

Under these rules, the Company (and its depository institution subsidiary, AENB) is subject to Category IV standards.

Because a firm’s categorization is determined by, and can change over time dependent upon, how the firm measures against the risk-based indicator thresholds, we are required to monitor and periodically report these risk-based indicators and there can be no assurance that the Company will continue to be a Category IV firm in the future.

Capital and Liquidity Regulation

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For additional information regarding our capital ratios, see “Consolidated Capital Resources and Liquidity” under “MD&A.”

Under the Capital Rules, banking organizations are required to maintain minimum ratios for Common Equity Tier 1 (CET1), Tier 1 capital (that is, CET1 plus additional Tier 1 capital) and Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets.

Under the Capital Rules, banking organizations are required to maintain minimum ratios for Common Equity Tier 1 (CET1 capital), Tier 1 capital (that is, CET1 capital plus additional Tier 1 capital) and Total capital (that is, Tier 1 capital plus Tier 2 capital) to risk-weighted assets.

We report our capital adequacy ratios using risk-weighted assets calculated under the standardized approach.

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In December 2017, the Basel Committee published standards that, among other things, revise the standardized approach for credit risk (including by recalibrating risk weights and introducing additional capital requirements for certain “unconditionally cancellable commitments” such as unused credit card lines of credit) and provide a new standardized calculation for operational risk capital requirements.

If adopted in the United States as issued by the Basel Committee and applicable to us, the new standards could result in higher capital requirements for us.

If adopted in the United States as issued by the Basel Committee and applicable to us, the new standards are likely to result in higher capital requirements for us.

In December 2018, federal banking regulators issued a final rule that provides an optional three-year phase-in period for the adverse regulatory capital effects of adopting the Current Expected Credit Loss (CECL) methodology pursuant to new accounting guidance for the recognition of credit losses on certain financial instruments, which became effective January 1, 2020.

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We elected to adopt the two-year delay followed by the three-year phase-in period.

Therefore, the Company will begin phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022.

Therefore, the Company began phasing in the cumulative amount that is not recognized in regulatory capital at 25 percent per year beginning January 1, 2022.

See “Critical Accounting Estimates” under “MD&A” for additional information on CECL.

The Company and AENB must each maintain CET1, Tier 1 capital and Total capital ratios of at least 4.5 percent, 6.0 percent and 8.0 percent, respectively.

On top of these minimum capital ratios, the Company is subject to a dynamic stress capital buffer (SCB) composed entirely of CET1 with a floor of 2.5 percent and AENB is subject to a static 2.5 percent capital conservation buffer (CCB).

The Company and AENB must each maintain CET1 capital, Tier 1 capital and Total capital ratios of at least 4.5 percent, 6.0 percent and 8.0 percent, respectively.

On top of these minimum capital ratios, the Company is subject to a dynamic stress capital buffer (SCB) composed entirely of CET1 capital with a floor of 2.5 percent and AENB is subject to a static 2.5 percent capital conservation buffer (CCB).

The SCB equals (i) the difference between a bank holding company’s starting and minimum projected CET1 capital ratios under the supervisory severely adverse scenario under the Federal Reserve's stress tests described below, plus (ii) one year of planned common stock dividends as a percentage of risk-weighted assets.

In August 2020, the SCB requirement for the Company was set at 2.5 percent.

On June 24, 2021, the Federal Reserve confirmed the SCB for the Company of 2.5 percent, which remained unchanged from the level announced in August 2020.

As a result, the effective minimum ratios for the Company (taking into account the SCB requirement) and AENB (taking into account the CCB requirement) are 7.0 percent, 8.5 percent and 10.5 percent for the CET1 capital, Tier 1 capital and Total capital ratios, respectively.

Banking organizations whose ratios of CET1 capital, Tier 1 capital or Total capital to risk-weighted assets are below these effective minimum ratios face constraints on discretionary distributions such as dividends, repurchases and redemptions of capital securities, and executive compensation.

A bank holding company’s SCB requirement is generally effective on October 1 of each year and will remain in effect through September 30 of the following year unless it is reset in connection with resubmission of a capital plan, as discussed below.

As a result, the effective minimum ratios for the Company (taking into account the SCB requirement) and AENB (taking into account the CCB requirement) are 7.0 percent, 8.5 percent and 10.5 percent for the CET1, Tier 1 capital and Total capital ratios, respectively.

Banking organizations whose ratios of CET1, Tier 1 Capital or Total capital to risk-weighted assets are below these effective minimum ratios face constraints on discretionary distributions such as dividends, repurchases and redemptions of capital securities, and executive compensation.

The capital distribution restrictions for the first quarter of 2021 discussed under “Stress Testing and Capital Planning” below are in addition to the SCB distribution constraints for bank holding companies at least through March 31, 2021.

The Federal Reserve is expected to announce by March 31, 2021 any recalibration of the SCB requirements announced in August 2020.

We are also required to comply with minimum leverage ratio requirements.

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The rule requires the maintenance of a liquidity buffer, consisting of highly liquid assets, that is sufficient to meet projected net outflows for 30 days over a range of liquidity stress scenarios, and a minimum liquidity coverage ratio (LCR) that measures a firm’s high-quality liquid assets to its projected net outflows.

Under the Tailoring Rules, Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to any LCR requirement.

Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to a specific LCR requirement.

A second standard provided for in the Basel III liquidity framework, referred to as the net stable funding ratio (NSFR), requires a minimum amount of longer-term funding based on the assets and activities of banking entities.

Under the final NSFR rule published in October 2020, Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to any NSFR requirement.

Under the NSFR rule, Category IV firms with less than $50 billion in weighted short-term wholesale funding, such as the Company, are not subject to a specific NSFR requirement.

Stress Testing and Capital Planning

Under the Federal Reserve’s regulations, the Company is subject to supervisory stress testing requirements that are designed to evaluate whether a bank holding company has sufficient capital on a total consolidated basis to absorb losses and support operations under adverse economic conditions.

As a Category IV firm, the Company was subject to the Federal Reserve’s supervisory stress tests in 2020 and will be required to participate in the supervisory stress tests every other year thereafter.

We are required to develop and submit to the Federal Reserve an annual capital plan.

In January 2021, the Federal Reserve finalized changes to the capital plan rule, which will, among other things, provide firms subject to Category IV standards additional flexibility to develop their capital plans.

In addition, these changes provide that for Category IV firms, such as the Company, the portion of the SCB based on the Federal Reserve's supervisory stress tests will be calculated every other year.

During a year in which a Category IV firm does not undergo a supervisory stress test, the firm will receive an updated SCB that reflects the firm's updated planned common stock dividends.

A Category IV firm will also be able to elect to participate in the supervisory stress test and consequently receive an updated SCB.

The Company must notify the Federal Reserve by April 5, 2021 if it elects to participate in the 2021 supervisory stress test.

As part of the Comprehensive Capital Analysis and Review (CCAR), the Federal Reserve evaluates whether the Company has sufficient capital to continue operations by assessing our pro-forma capital position and ratios under a scenario of economic and financial market stress, and uses that information to determine the size of the SCB for each CCAR participating firm.

Due to the continued economic uncertainty from the coronavirus pandemic, in June 2020, the Federal Reserve required all bank holding companies participating in CCAR to resubmit their capital plans in November 2020.

In addition, the Federal Reserve prohibited share repurchases in the third and fourth quarters of 2020 for all bank holding companies participating in CCAR and allowed them to pay common stock dividends provided (a) they did not increase the amount of the dividend and (b) the dividends did not exceed the average of a firm’s net income for the four preceding calendar quarters.

On December 18, 2020, the Federal Reserve released the results of its second round of supervisory stress tests for all bank holding companies participating in CCAR based on economic scenarios reflecting changes in financial markets and the macroeconomic outlook.

The Federal Reserve announced that it would allow bank holding companies participating in CCAR to pay common stock dividends and repurchase common stock in the first quarter of 2021 provided (a) the dividends and repurchases, in the aggregate, do not exceed the average of a firm’s net income for the four preceding calendar quarters and (b) the firm does not increase the amount of its common stock dividends beyond the level paid in the second quarter of 2020.

The Federal Reserve also announced that it would permit stock repurchases equal to the amount of share issuances related to expensed employee compensation.

As part of the Comprehensive Capital Analysis and Review (CCAR), the Federal Reserve uses pro-forma capital positions and ratios under such stress scenarios to determine the size of the SCB for each CCAR participating firm.

As a Category IV firm, the Company is required to participate in the supervisory stress tests every other year and is subject to the Federal Reserve’s supervisory stress tests in 2022.

The Company is required to develop and submit to the Federal Reserve an annual capital plan on or before April 5 of each year.

For Category IV firms, such as the Company, the portion of the SCB based on the Federal Reserve's supervisory stress tests is calculated every other year.

During a year in which a Category IV firm does not undergo a supervisory stress test, the firm receives an updated SCB that reflects the firm's updated planned common stock dividends.

A Category IV firm can elect to participate in the supervisory stress test in an “ off year” and consequently receive an updated SCB.

Due to the economic uncertainty related to the pandemic, the Federal Reserve prohibited share repurchases in the third and fourth quarters of 2020 for all bank holding companies participating in CCAR, but a llowed them to pay common stock dividends provided (a) they did not increase the amount of the dividend and (b) the dividends did not exceed the average of a firm’s net income for the four preceding calendar quarters.

During the first and second quarters of 2021, the Federal Reserve allowed bank holding companies participating in CCAR to repurchase common stock and pay common stock dividends provided (a) the repurchases and dividends, in the aggregate, did not exceed the average of a firm’s net income for the four preceding calendar quarters and (b) the firm did not increase the amount of its common stock dividends beyond the level paid in the second quarter of 2020.

The Federal Reserve also permitted stock repurchases equal to the amount of share issuances related to expensed employee compensation.

These capital distribution restrictions ceased to apply on July 1, 2021.

For additional information regarding our capital distributions, see “Consolidated Capital Resources and Liquidity” under “MD&A.”

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The FDIA imposes progressively more restrictive constraints on operations, management and capital distributions, depending on the capital category in which an institution is classified.

In order to be considered “well capitalized,” AENB must maintain CET1, Tier 1 capital, Total capital and Tier 1 leverage ratios of 6.5 percent, 8.0 percent, 10.0 percent and 5.0 percent, respectively.

In order to be considered “well capitalized,” AENB must maintain CET1 capital, Tier 1 capital, Total capital and Tier 1 leverage ratios of 6.5 percent, 8.0 percent, 10.0 percent and 5.0 percent, respectively.

Under the FDIA, AENB could be prohibited from accepting brokered deposits (i.e., deposits raised through third-party brokerage networks) or offering interest rates on any deposits significantly higher than the prevailing rate in its normal market area or nationally (depending upon where the deposits are solicited), unless (1) it is well capitalized or (2) it is adequately capitalized and receives a waiver from the FDIC.

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If a federal regulator determines that we are in an unsafe or unsound condition or that we are engaging in unsafe or unsound banking practices, the regulator may reclassify our capital category or otherwise place restrictions on our ability to accept or solicit brokered deposits.

On December 15, 2020, the FDIC finalized a rule intended to update and modernize the FDIC’s brokered deposit regulations.

The final rule, among other things, expands the definition of “deposit broker” and updates the interest rate restrictions for less than well capitalized banks.

The final rule is expected to become effective on April 1, 2021.

In December 2020, the FDIC issued a final rule intended to update and modernize the FDIC’s brokered deposit regulations.

Effective April 1, 2021, the final rule, among other things, expanded the definition of “deposit broker” and updated the interest rate restrictions for less than well capitalized banks.

Resolution Planning

Pursuant to Dodd Frank, certain bank holding companies are required to submit resolution plans to the Federal Reserve and FDIC providing for the company’s strategy for rapid and orderly resolution in the event of its material financial distress or failure.

However, in connection with the release of the Tailoring Rules, the Federal Reserve and FDIC finalized rules in October 2019 which, among other things, adjust the review cycles and applicability of the agencies’ resolution planning requirements.

Under these rules, Category IV firms such as the Company are not required to submit a holding company resolution plan.

Certain bank holding companies are required to submit resolution plans to the Federal Reserve and FDIC providing for the company’s strategy for rapid and orderly resolution in the event of its material financial distress or failure.

However, Category IV firms, such as the Company, are not required to submit a holding company resolution plan.

AENB continues to be required to prepare and provide a separate resolution plan to the FDIC that would enable the FDIC, as receiver, to effectively resolve AENB under the FDIA in the event of failure.

The FDIC issued an Advance Notice of Proposed Rulemaking on potential revisions to this separate resolution plan requirement for insured depository institutions in April 2019 and temporarily suspended resolution planning requirements for insured depository institutions.

In January 2021, the FDIC lifted the moratorium on resolution plan submissions for insured depository institutions with $100 billion or more in assets, including AENB, and will provide at least 12-months advance notice to firms required to submit resolution plans.

In January 2021, the FDIC lifted the moratorium on resolution plan submissions for insured depository institutions with $100 billion or more in assets, including AENB.

On June 25, 2021, the FDIC released a statement outlining a modified approach to implementing the FDIC’s rule requiring insured depository institutions with $100 billion or more in total assets to submit resolution plans.

Among other things, the modified approach (i) extends the resolution plan’s submission frequency to a three-year cycle;

(ii) lays out new details regarding the FDIC’s emphasis on engagement with firms;

and (iii) exempts filers from other content requirements that the FDIC has determined have been less useful or are obtainable through other supervisory channels.

Orderly Liquidation Authority

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and (iii) change the methods for CRA measurement, data collection, recordkeeping and reporting for national banks and federal savings associations.

The final rule retains the current community development test for limited purpose banks, such as AENB, which evaluates a bank’s community development performance through its community development loans, investments and services.

The final rule requires institutions like AENB to designate additional geographic assessment areas where CRA activities will be measured for significant concentrations of retail domestic deposits.

AENB must comply with the final rule by January 1, 2023.

Effective January 1, 2022, that final rule was rescinded and replaced with a rule based on the rules adopted jointly by the federal banking agencies in 1995, as amended.

This action was intended to promote consistency for all insured depository institutions while the agencies continue their ongoing work to modernize the CRA framework on an interagency basis.

Climate Risk Management

banking agencies steadily increased their focus on climate risk-related supervision during 2021 and are expected to expand and formalize that focus in 2022.

For example, on October 21, 2021, the Financial Stability Oversight Council (FSOC) issued its Report on Climate-Related Financial Risk, which contains 35 recommendations for FSOC’s member agencies and serves as a framework for next steps.

In addition, on December 16, 2021, the OCC issued for public comment a set of proposed “Principles for Climate-Related Financial Risk Management for Large Banks.” The principles would apply to OCC-regulated institutions with more than $100 billion in total consolidated assets, like AENB, and are broadly designed to provide a high-level framework for the safe and sound management of exposures to climate-related financial risks consistent with existing OCC rules and guidance.

The principles outline six key aspects of climate-related financial risk management:

policies, procedures and limits;

strategic planning;

risk management;

data, risk measurement and reporting;

and scenario analysis.

In addition, the principles offer risk assessment guidance for incorporating climate-related financial risks in various traditional risk categories.

It is too early to determine what regulations and policies may be adopted or apply to the Company and AENB and the effect of any such regulations or policies on the Company and AENB.

Consumer Financial Products Regulation

In the United States, our marketing, sale and servicing of consumer financial products and our compliance with certain federal consumer financial laws are supervised and examined by the CFPB, which has broad rulemaking and enforcement authority over providers of credit, savings and payment services and products, and authority to prevent “unfair, deceptive or abusive” acts or practices.

The CFPB has the authority to write regulations under federal consumer financial protection laws, to enforce those laws and to examine for compliance.

It is also authorized to collect fines and require consumer restitution in the event of violations, engage in consumer financial education, track consumer complaints, request data and promote the availability of financial services to underserved consumers and communities.

In addition, a number of U.S.

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federal law also regulates abusive debt collection practices, which, along with bankruptcy and debtor relief laws, can affect our ability to collect amounts owed to us or subject us to regulatory scrutiny.

On October 30, 2020, the CFPB issued a final rule that sets forth additional requirements for third-party debt collection agencies, which we use in the ordinary course of business.

On November 30, 2021, the CFPB’s final rule that sets forth additional requirements for third-party debt collection agencies, which we use in the ordinary course of business, became effective.

See “ We are exposed to credit risk and trends that affect Card Member spending and the ability of customers and partners to pay us, which could have a material adverse effect on our results of operations and financial condition ” under “Risk Factors” for potential impacts related to legal and regulatory changes on our ability to collect amounts owed to us.

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In addition, we are required by the laws of many states to comply with unclaimed and abandoned property laws, under which we must pay to states the face amount of any Travelers Cheque or prepaid card that is uncashed or unredeemed after a period of time depending on the type of product.

Additionally, we are regulated under insurance laws in the United States and other countries where we offer insurance services.

In countries outside the United States, regulators continue to focus on a number of key areas impacting our card-issuing businesses, particularly consumer protection (such as in the European Union (EU), the United Kingdom and Canada) and responsible lending (such as in Australia, Mexico, New Zealand and Singapore), with increasing importance on and attention to customers and outcomes rather than just ensuring compliance with local rules and regulations.

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Legislators and regulators in various countries in which we operate have focused on the operation of card networks, including through enforcement actions, legislation and regulations to change certain practices or pricing of card issuers, merchant acquirers and payment networks, and, in some cases, to establish broad and ongoing regulatory oversight regimes for payment systems.

The EU, Australia and other jurisdictions have focused on interchange fees (that is, the fee paid by the bankcard merchant acquirer to the card issuer in payment networks like Visa and Mastercard), as well as the rules, contract terms and practices governing merchant card acceptance.

The EU, Australia, Canada and other jurisdictions have focused on interchange fees (that is, the fee paid by the bankcard merchant acquirer to the card issuer in payment networks like Visa and Mastercard), as well as the rules, contract terms and practices governing merchant card acceptance.

Regulation and other governmental actions relating to pricing or practices could affect all networks directly or indirectly, as well as adversely impact consumers and merchants.

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In some cases, regulations also extend to certain aspects of our business, such as network and cobrand arrangements or the terms of card acceptance for merchants, and we have exited our network businesses in the EU and Australia as a result of regulation in those jurisdictions, for example.

In addition, there is uncertainty as to when or how interchange fee caps and other provisions of the EU payments legislation might apply when we work with cobrand partners and agents in the EU.

Given differing interpretations by regulators and participants in cobrand arrangements, we are subject to regulatory action, penalties and the possibility we will not be able to maintain our existing cobrand and agent relationships in the EU.

There is uncertainty as to when or how interchange fee caps and other provisions of the EU and UK payments legislation might apply when we work with cobrand partners and agents in the EU and the UK.

In various countries, such as certain Member States in the EU and Australia, merchants are permitted by law to surcharge card purchases.

In addition, the laws of a number of states in the United States that prohibit surcharging have been challenged in litigation brought by merchant groups and some such laws have been overturned.

Surcharging is an adverse customer experience and could have a material adverse effect on us if it becomes widespread, particularly where it only or disproportionately impacts credit card usage, our Card Members or our business.

In addition, other steering or differential acceptance practices that are permitted by regulation in some countries could also have a material adverse effect on us if they become widespread.

In addition, the laws of a number of states in the United States that prohibit surcharging have been overturned and certain states have passed or are considering laws to permit surcharging by merchants.

Surcharging is an adverse customer experience and could have a material adverse effect on us, particularly where it only or disproportionately impacts credit card usage or card usage generally, our Card Members or our business.

In addition, other steering or differential acceptance practices that are permitted by regulation in some jurisdictions could also have a material adverse effect on us.

See “ Surcharging or steering by merchants could materially adversely affect our business and results of operations ” under “Risk Factors.”

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For example, the Reserve Bank of India, which has broad power under the Payment and Settlement Systems Act, 2007 to regulate the membership and operations of card networks, has issued a mandate requiring payment systems operators in India to store certain payments data locally.

On April 23, 2021, the Reserve Bank of India imposed restrictions on the ability of American Express Banking Corp.

to engage in certain card issuing activities in India from May 1, 2021 until it complies with a regulation requiring storage of payment transaction data exclusively in India.

This order does not impact existing customers.

We are working towards complying with the regulation.

Governments in some countries also provide resources or protection to select domestic payment card networks.

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Among other things, GLBA imposes certain limitations on our ability to share consumers’ nonpublic personal information with nonaffiliated third parties and requires us to develop, implement and maintain a written comprehensive information security program containing safeguards that are appropriate to the size and complexity of our business, the nature and scope of our activities and the sensitivity of customer information that we process.

We are required to offer expanded privacy rights to California residents who are not covered by GLBA, pursuant to the California Consumer Privacy Act.

More recently, we have expanded privacy rights to California residents who are not covered by GLBA, pursuant to the California Consumer Privacy Act and the California Privacy Rights Act.

Various regulators, U.S.

states and territories are considering similar requirements or have adopted laws, rules and regulations pertaining to privacy and/or information and cyber security that may be more stringent and/or expansive than federal requirements.

We are also subject to certain privacy, data protection, data governance and information and cyber security laws in other countries in which we operate (including countries in the EU, Australia, Canada, China, Japan, Hong Kong, India, Mexico, Singapore and the United Kingdom), some of which are more stringent and/or expansive than those in the United States.

Some countries have also instituted laws requiring in-country data processing and/or in-country storage of data.

Compliance with such laws could result in higher technology, administrative and other costs for us, could limit our ability to optimize the use of our closed-loop data, and could require use of local technology services.

Certain laws also require us to provide foreign governments and other third parties broader access to our data and intellectual property.

Data breach and operational outage notification laws or regulatory activities to encourage such notifications are also becoming more prevalent in jurisdictions outside the United States in which we operate.

In Europe, the EU General Data Protection Regulation (GDPR) imposes legal and compliance obligations on companies that process personal data of individuals in the EU, irrespective of the geographical location of the company, with significant fines for non-compliance (up to 4 percent of total annual worldwide revenue).

We continue to rely on our binding corporate rules as the primary method for lawfully transferring data from our European affiliates to our affiliates in the United States and elsewhere globally.

Some countries and the EU have instituted or are considering instituting requirements that make it onerous to transfer personal data to other jurisdictions.

Other countries may require in-country data processing and/or in-country storage of data.

Compliance with such laws results in higher technology, administrative and other costs for us, could limit our ability to optimize the use of our closed-loop data, and could require use of local technology services.

Some of these laws also require us to provide foreign governments and other third parties broader access to our data and intellectual property.

Data breach and operational outage notification laws or regulatory activities to encourage such notifications and regulatory activity and laws around resiliency, business continuity and third-party risk management are also becoming more prevalent in jurisdictions outside the United States in which we operate.

In Europe, the EU General Data Protection Regulation (GDPR) imposes legal and compliance obligations on companies that process personal data of individuals in the EU, irrespective of the geographical location of the company, with the potential for significant fines for non-compliance (up to 4 percent of total annual worldwide revenue).

The GDPR includes, among other things, a requirement for prompt notice of data breaches, in certain circumstances, to affected individuals and supervisory authorities.

The GDPR was transposed into UK domestic law in January 2021 following the United Kingdom's exit from the EU.

This is known as the UK GDPR and it supplements the United Kingdom's Data Protection Act of 2018.

The UK GDPR mirrors the compliance requirements and fine structure of the GDPR.

In addition, the European Directive 2002/58/EC (the ePrivacy Directive) will continue to set out requirements for the processing of personal data and the protection of privacy in the electronic communications sector until the approval of the forthcoming ePrivacy Regulation.

The ePrivacy Directive places restrictions on, among other things, the sending of unsolicited marketing communications, as well as on the collection and use of data about internet users.

The European Central Bank and the European Banking Authority have enacted or are considering secondary legislation focused on security breaches, outsourcing, resiliency, strong customer authentication and information security-related policies.

Likewise, a network and information security directive has been implemented into national laws by Member States in the EU.

The Revised Payment Services Directive (PSD2) also contains regulatory requirements on strong customer authentication, open access to customer data and payment capabilities, and measures to prevent security incidents.

The UK GDPR, which became effective in January 2021, mirrors the compliance requirements and fine structure of the GDPR.

Anti-Money Laundering, Sanctions and Anti-Corruption Compliance

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Anti-Money Laundering

American Express is subject to a significant number of AML laws and regulations as a result of being a financial company headquartered in the United States, as well as having a global presence.

We are subject to a significant number of AML laws and regulations as a result of being a financial company headquartered in the United States, as well as having a global presence.

In the United States, the majority of AML requirements are derived from the Currency and Foreign Transactions Reporting Act and the accompanying regulations issued by the U.S.

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Among other things, these laws and regulations require us to establish AML programs that meet certain standards, including, in some instances, expanded reporting, particularly in the area of suspicious transactions, and enhanced information gathering and recordkeeping requirements.

Our AML programs have become the subject of heightened scrutiny in some countries.

Any errors, failures or delays in complying with federal, state or foreign AML and counter-terrorist financing laws or perceived deficiencies in our AML programs could result in significant criminal and civil lawsuits, penalties and forfeiture of significant assets or other enforcement actions.

Our AML programs have become the subject of heightened scrutiny in some countries, including certain Member States in the EU.

Any errors, failures or delays in complying with AML and counter-terrorist financing laws, perceived deficiencies in our AML programs or association of our business with money laundering, terrorist financing, tax fraud or other illicit activity can give rise to significant supervisory, criminal and civil proceedings and lawsuits, which could result in significant penalties and forfeiture of assets, loss of licenses or restrictions on business activities, or other enforcement actions.

Office of Foreign Assets Control Regulation

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Failure to comply with such requirements could subject us to serious legal and reputational consequences, including criminal penalties.

Pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act of 2012, which added Section 13(r) to the Securities Exchange Act of 1934, as amended (the Exchange Act), an issuer is required to disclose in its annual or quarterly reports, as applicable, whether it or any of its affiliates knowingly engaged in certain activities, transactions or dealings relating to Iran or with individuals or entities designated pursuant to certain Executive Orders.

Disclosure is generally required even where the activities, transactions or dealings were conducted outside the United States by non-U.S.

affiliates in compliance with applicable law, and whether or not the activities are sanctionable under U.S.

In 2020, we became aware of credit card accounts opened with American Express International, Inc.

(Hong Kong branch) by the Acting Consul General of the Iranian Consulate in Hong Kong, and his predecessor, the now-former Consul General.

We believe these cards were used only for personal expenses.

The Acting Consul General had two cards, both of which were opened in 2018 and one of which was closed by client request on or about April 3, 2019, and the other of which was cancelled by us on or about June 16, 2020.

The former Consul General’s card was issued in January 2019 and cancelled by us on or about March 13, 2019.

We had negligible gross revenues and net profits attributable to these accounts.

As all of the accounts were cancelled, we do not intend to continue to engage in this activity.

Anti-Corruption

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Compensation Practices

Our compensation practices are subject to oversight by the Federal Reserve.

Our compensation practices are subject to oversight by the Federal Reserve and the OCC.

The federal banking regulators’ guidance on sound incentive compensation practices sets forth three key principles for incentive compensation arrangements that are designed to help ensure that incentive compensation plans do not encourage imprudent risk-taking and are consistent with the safety and soundness of banking organizations.

The three principles provide that a banking organization’s incentive compensation arrangements should (1) provide incentives that appropriately balance risk and financial results in a manner that does not encourage employees to expose their organizations to imprudent risks, (2) be compatible with effective internal controls and risk management, and (3) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

Any deficiencies in our compensation practices that are identified by the Federal Reserve or other banking regulators in connection with their review of our compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or perform other actions.

Any deficiencies in our compensation practices that are identified by the banking regulators in connection with their review of our compensation practices may be incorporated into our supervisory ratings, which can affect our ability to make acquisitions or perform other actions.

Enforcement actions may be taken against us if our incentive compensation arrangements or related risk-management control or governance processes are determined to pose a risk to our safety and soundness, and we have not taken prompt and effective measures to correct the deficiencies.

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You can find certain statistical disclosures required of bank holding companies starting on page A-1, which are incorporated herein by reference.

Our business as a whole has not experienced significant seasonal fluctuations, although card billed business tends to be moderately higher in the fourth quarter than in other quarters.

Our business as a whole has not experienced significant seasonal fluctuations, although network volumes tend to be moderately higher in the fourth quarter than in other quarters.

As a result, the amount of Card Member loans and receivables outstanding tend to be moderately higher during that quarter.

The average discount rate also tends to be slightly lower during the fourth quarter due to a higher level of retail-related billed business volumes.

The average discount rate also tends to be slightly lower during the fourth quarter due to a higher level of retail-related billed business.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business