The Financial Crimes Enforcement Network and banking agencies today proposed revisions to financial institutions’ Bank Secrecy Act program rule requirements to “fundamentally reform” compliance with the law. The rules would set new minimum standards for what financial institutions should include in their anti-money laundering programs, and require all AML programs to include countering the financing of terrorism.
The proposed rulemakings are part of what the Treasury Department said was a broader effort to modernize the AML/CFT regulatory and supervisory framework “to better achieve the purposes of the BSA.” Among other things, the rules would establish that only “significant or systemic failures” by a financial institution to implement a properly established AML/CFT program would warrant an enforcement action or a significant supervisory action.
“For too long, Washington has asked financial institutions to measure success by the volume of paperwork rather than their ability to stop illicit finance threats,” Treasury Secretary Scott Bessent said in a statement. “Our proposal restores common sense with a focus on keeping bad actors out of the financial system, not burying America’s banks in more red tape.”
Four pillars
Under FinCEN’s proposal, a financial institution’s AML/CFT program would need to incorporate four “core pillars.” They are:
- Internal policies, procedures and controls, including risk assessment processes and, when applicable, ongoing customer due diligence. Financial institutions would be required to allocate more resources to higher-risk customers rather than lower-risk customers.
- Independent program testing. Such testing must assess compliance, focus on program effectiveness, and be conducted by individuals “truly independent” of the AML/CFT function.
- Designation of a U.S.-based compliance officer. However, other personnel involved in AML/CFT functions would be allowed to live outside the U.S.
- Ongoing employee training. Such training should reflect the institution’s internal controls, risk assessment results, and current regulatory requirements, with the training tailored to an institution’s risk profile and employee roles.
In addition, the joint rule by the FDIC, Office of the Comptroller of the Currency and National Credit Union Administration would align their supervision with the regulatory scheme proposed by FinCEN.
Comments are due 60 days after publication in the Federal Register.
ABA responds
In a statement, American Bankers Association President and CEO Rob Nichols commended the Treasury Department “for considering banks’ perspectives, cutting through red tape, and taking concrete steps to advance a true risk-based approach to BSA compliance.”
“By allowing banks to reallocate resources to higher risk activities and focusing enforcement on the most serious program deficiencies, this framework would strengthen the effectiveness of banks’ anti-money laundering and counter terror financing efforts while increasing the efficiency of bank compliance programs,” Nichols said.
“We welcome FinCEN’s elevated role in AML/CFT supervision and enforcement to ensure greater alignment and consistency across agencies,” he added. “This increased coordination would provide much-needed cohesiveness and stability for our nation’s banks, enabling them to better protect the financial system while continuing to serve customers and communities across the country.”
