Banking and Finance Law Daily Agencies attempt to improve transparency and efficiency in BSA/AML supervision
Tuesday, July 23, 2019

Agencies attempt to improve transparency and efficiency in BSA/AML supervision

By Donielle Tigay Stutland, J.D.

In an effort to increase transparency, the federal banking agencies and FinCEN issued a joint statement to outline the risk-focused approach to BSA/AML examinations; CBA reiterated banks’ commitment to work with regulators to improve the BSA/AML regulatory scheme.

On July 22, 2019, the Federal Reserve BoardFederal Deposit Insurance Corporation, National Credit Union Administration, Office of the Comptroller of the Currency (collectively, the federal banking agencies), and the Financial Crimes Enforcement Network issued a joint statement to emphasize their risk-focused approach to examinations of institutions’ Bank Secrecy Act/anti-money laundering (BSA/AML) compliance programs. While the joint statement did not issue any new requirements for supervised institutions, it did emphasize the agencies’ goal of improving transparency with respect to the current risk-based approach. Specifically, it seeks to help institutions with the planning around BSA/AML examinations in efforts to increase efficiency.

Compliance programs and risk profiles. The statement provides overview of common practices in risk-based compliance programs. It also indicates that the agencies’ recognize the importance of a risk-based compliance program in enabling a bank to allocate compliance resources commensurate with its risk, and a well-developed risk assessment is crucial to sound risk management and assisting examiners in understanding a bank’s risk profile.

Risk-focused examinations. In an effort to assist examiners and banks in preparation for examinations, the statement gave a summary of risk assessment common practices. As examiners tailor examination plans and procedures to a bank’s risk profile, some common practices detailed in the statement include:

  • leveraging available information, including the bank’s BSA/AML risk assessment, independent testing or audits, analyses and conclusions from previous examinations, and other information available through the off-site monitoring process or a request letter to the bank;
  • contacting banks between examinations or prior to finalizing the scope of an examination; and
  • considering the bank’s ability to identify, measure, monitor, and control risks.

In determining appropriate examination procedures to be performed, the statement noted that examiners review risk assessments and independent testing of risk areas. The statement also noted that the risk-focused approach forms the foundation of the information available to examiners in the Federal Financial Council BSA/AML Examination Manual.

CBA statement. The Consumer Bankers Association (CBA) also issued a statement on July 22, 2019, to comment on the desire of its constituent banks to move towards an enhanced regulatory scheme in this arena, as well as noting the commitment of banks to assist regulators.

CBA President and CEO Richard Hunt stated, "CBA Member Banks are committed to working with regulators and law enforcement to deter financial crimes and commit significant resources toward that end. We support the working group’s efforts to collaborate across agencies to improve current BSA/AML regulations, and encourage the group to focus its efforts on those aspects of the current BSA/AML regulations and supervisory approach that are most burdensome and most outdated." He also pledged to work with Congress wherever necessary, including establishing a centralized database of beneficial ownership information collected and verified by a government agency. This would allow banks to streamline the collection and reporting process in order to prevent "potential bad actors from accessing the financial system."

Companies: Consumer Bankers Association

MainStory: TopStory BankSecrecyAct FederalReserveSystem FinancialStability

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