Are Customers “Cleaning” Their Money In Your Transaction?

On August 24, 2020 the Federal Reserve, Federal Deposit Insurance Corp (FDIC), National Credit Union Administration (NCAU) and the Office of the Comptroller of the Currency (OCC) issued a joint statement to “enhance transparency about how they evaluate enforcement actions when financial institutions fail to meet Bank Secrecy/Anti-Money Laundering requirements.

Less than one month later, on September 17, 2020 the Financial Crimes Enforcement Newtork (FinCEN) put out an Advance Notice of Proposed Rulemaking (ANPR) looking for comments on how to improve the effectiveness of anti-money laundering programs required under the Bank Secrecy Act.

The ANPR proposal imposes a requirement that certain financial institutions establish and maintain…”effective and reasonably designed” AML program containing three core elements and objectives:

1. how to assess and manage risk
2. how to comply with BSA requirements
3. the reporting of information with a high degree of usefulness to the government.

If you are curious and just won’t sleep tonight without knowing, here are the 11 questions the APRN is seeking feedback on by November 16, 2020:

1. Does the ANPRM make clear the concept that FinCEN is considering for an ‘‘effective and reasonably designed’’ AML program through regulatory amendments to the AML program rules? If not, how should the concept be modified to provide greater clarity?
2. Are the three proposed core elements and objectives of an ‘‘effective and reasonably designed’’ AML program appropriate?  Should FinCEN make any changes to the three proposed elements of an ‘‘effective and reasonably designed’’ AML program in a future notice of  proposed rulemaking?
3. Are the changes to the AML regulations under consideration an appropriate mechanism to achieve the objective of increasing the effectiveness of AML programs? If not, what different or additional mechanisms should FinCEN consider?
4. Should regulatory amendments to incorporate the requirement for an ‘‘effective and reasonably designed’’ AML program be proposed for all financial institutions
   currently subject to AML program rules? Are there any industry-specific issues that FinCEN should consider in a future notice of proposed rulemaking to further define an ‘‘effective and reasonably designed’’ AML program?
5. Would it be appropriate to impose an explicit requirement for a risk-assessment process that identifies, assesses, and reasonably mitigates risks in order to achieve an ‘‘effective and reasonably designed’’ AML program? If not, why? Are there other alternatives that FinCEN should consider? Are there factors unique to how certain institutions or industries develop and apply a risk assessment that FinCEN should consider? Should there be carveouts or waivers to this requirement, and if so, what factors should FinCEN evaluate to determine the application thereof?
6. Should FinCEN issue Strategic AML Priorities, and should it do so every two years or at a different interval? Is an explicit requirement that risk assessments consider the Strategic AML Priorities appropriate? If not, why? Are there alternatives that FinCEN should consider?
7. Aside from policies and procedures related to the risk assessment process, what additional changes to AML program policies, procedures, or processes would financial institutions need to implement if FinCEN implemented regulatory changes to incorporate the requirement for an ‘‘effective and reasonably designed’’ AML program, as described in this ANPRM? Overall, how long of a  period should FinCEN provide for implementing such changes?
8. As financial institutions vary widely in business models and risk profiles, even within the same category of financial institution, should FinCEN consider any regulatory changes to appropriately reflect such differences in risk profile? For example, should regulatory amendments to incorporate the requirement for an ‘‘effective and reasonably designed’’ AML program be proposed for all financial institutions within each industry type, or should this requirement differ based on the size or operational complexity of these financial institutions, or some other factors? Should smaller, less complex financial institutions, or institutions that already maintain effective BSA compliance programs with risk assessments that sufficiently manage and mitigate the risks identified as Strategic AML Priorities, have the ability to ‘‘opt in’’ to making changes to AML programs as described in this ANPRM?
9. Are there ways to articulate objective criteria and/or a rubric for examination of how financial institutions would conduct their risk assessment processes and report in
   accordance with those assessments, based on the regulatory proposals under consideration in this ANPRM?
10. Are there ways to articulate objective criteria and/or a rubric for independent testing of how financial institutions would conduct their risk-assessment processes and
    report in accordance with those assessments, based on the regulatory proposals under consideration in this ANPRM?
11. A core objective of the incorporation of a requirement for an ‘‘effective and reasonably designed’’ AML program would be to provide financial institutions with greater flexibility to reallocate resources towards Strategic AML Priorities, as appropriate. FinCEN seeks comment on whether such regulatory changes would increase or  decrease the regulatory burden on financial institutions. How can FinCEN, through future rulemaking or any other mechanisms, best ensure a clear and shared  understanding in the financial industry that AML resources should not merely be reduced as a result of such regulatory amendments, but rather should, as appropriate, be reallocated to higher priority area

Financial institutions and trade associations are all encouraged to weigh in.  FinCEN is looking for detailed comments and suggestions from all financial sectors.

Comments may be submitted, identified by Regulatory Identification Number (RIN) 1506– AB44, by any of the following methods:

• Federal E-rulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
  Include RIN 1506–AB44 in the submission. Refer to Docket Number FINCEN–2020–0011.
• Mail: Financial Crimes Enforcement Network, P.O. Box 39, Vienna, VA

Training is one component of the due diligence, however, the amount of training and content for BSA/AML is not clearly specified.

A search in 31 CFR Chapter X of the Federal Register identifies training ONCE!  The reference not specific, simply referencing “an ongoing employee training program.”

As a course developer and instructor offering BSA/AML training, we too look for feedback on how much AML training is enough and what topics we should cover.

Please email or call me for your suggestions or input on this clearly important topic.  deb@cloes.online  (866) 256-3766.