FinCEN, Banking Agencies Encourage Innovation in AML/BSA Compliance

The banking agencies, along with the Financial Crimes Enforcement Network, today issued a statement encouraging banks to consider, study and — where appropriate — implement innovative approaches to anti-money laundering and Bank Secrecy Act compliance. The statement was unveiled by Treasury Under Secretary for Terrorism and Financial Intelligence Sigal Mandelker at the ABA/ABA Financial Crimes Enforcement Conference in National Harbor, Md., who emphasized that “we in the government are committed to helping you in those efforts.”

The statement noted that agencies are open to bank pilot programs. It “recognizes that private-sector innovation . . . can be an important element in safeguarding the financial system against an array of evolving financial threats,” Mandelker said. She cited signs of increasing banking industry sophistication in AML/BSA, including the establishment of internal financial intelligence units and the deployment of artificial intelligence and machine learning. “When responsibly deployed, these types of innovations are already proving invaluable,” she added, noting that they have already identified potential front companies associated with sanctions subjects in Iran and North Korea.

Mandelker added that “the statement also recognizes the value of trial and error.” Pilot programs “should not subject the financial institution to supervisory criticism,” she noted. The statement specifies that FinCEN will consider exceptive relief to facilitate testing of new tech and innovations, provided that banks maintain the overall effectiveness of their AML/BSA compliance programs. “We will not automatically assume that the bank’s existing processes are deficient,” she said. The statement also makes clear that banks will not be subject to criticism for not pursuing innovative approaches provided that they maintain overall effective programs.

American Bankers Association President and CEO Rob Nichols welcomed the statement and Mandelker’s remarks. “The conference showcases how banks work diligently alongside regulators and law enforcement to protect the financial system from a growing array of evolving threats,” he said. “Allowing for more private sector innovation can help ensure that we stay one step ahead of bad actors, while also reducing compliance burdens.”