The American Bankers Association this week said it strongly supports the shift toward risk-based compliance in a proposed overhaul of the Bank Secrecy Act program rule.
In April, the Financial Crimes Enforcement Network and federal banking agencies proposed 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 proposal would be the first major overhaul of the BSA in more than two decades if adopted.
ABA said that for the first time, the proposal would expressly permit banks to allocate BSA compliance resources based on risk, establish a floor and corresponding safe harbor from significant supervisory and civil enforcement actions, and promote greater coordination between FinCEN and the federal banking agencies. It is also a welcome shift toward highly useful outcomes rather than prescriptive processes, the association added.
Still, ABA offered several recommendations to improve the proposal. The agencies should incorporate into their final rules key preamble language that supports innovation, defers to banks’ reasonable risk assessments, and recognizes that an effective program cannot identify every illicit finance risk, the association said.
The agencies should clarify that regulators should not second-guess banks’ reasonable judgments about risk assessments and resource allocation, ABA added. Also, the agencies should move quickly to reform the individual BSA operational rules, and the proposed rule’s 12-month implementation period should begin only after the agencies train examiners and update critical guidance.
“Without these changes, banks will remain tied to check-the-box compliance exercises that divert resources from higher-risk customers and activities,” ABA said. “With them, the proposals can better achieve the purpose of having a BSA compliance program: protecting the U.S. financial system and national security while reducing unnecessary and ineffective compliance burdens on banks.”
