Washington, D.C. — The Bank Policy Institute (BPI) expressed significant concerns regarding a recent proposal by the Financial Crimes Enforcement Network (FinCEN) aimed at amending existing rules to combat illicit finance. The proposed rule introduces fundamental changes to the oversight of financial institutions' anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance programs, as mandated by the Anti-Money Laundering Act of 2020. BPI contends in a comment letter that FinCEN is persisting with an ineffective one-size-fits-all AML/CFT regime that emphasizes technical compliance over effectively combating financial crime.
BPI President and CEO Greg Baer stated:
“Congress in 2020 recognized that the examination process for the AML/CFT regime was broken — focused on documentation and box checking rather than innovation and results — and it issued a sweeping mandate to the Treasury Department to fix it. Sadly, the proposal from FinCEN, however well intentioned, would do little to change the status quo. It reiterates the need for a risk-based approach to compliance but gives banks no assurance that they will not be subject to examiner sanction if they reallocate resources away from any area, and something goes wrong. The proposal sounds good in theory, but its lack of specifics means that it is bound to fail in practice.”
BPI’s comment letter outlines four primary recommendations:
1. Empower banks to reallocate compliance resources to higher-risk activities: Banks should have the authority to shift resources towards high-risk activities instead of applying equal AML/CFT resources across all financial activities.
2. Focus on big-picture assessments rather than prescriptive timelines: FinCEN's requirement for banks to update their risk assessment based on vague timelines creates confusion. Instead, "material change" should be clearly defined by significant risks, allowing banks discretion over periodic updates.
3. Allow efficient resource deployment: Banks should be permitted to leverage offshore personnel for U.S. AML/CFT functions as long as these are overseen domestically.
4. Set realistic implementation timelines: Extending the timeline from six months to at least two years would accommodate necessary updates in training, processes, and controls.
The AML Act of 2020 aims at modernizing and strengthening AML/CFT programs while promoting innovation and technical advances among other goals.
The deadline for comments was September 3, 2024; FinCEN will consider these comments before issuing a final rule.
The Bank Policy Institute represents universal banks, regional banks, and major foreign banks operating in the United States. It conducts academic research on regulatory policies and advocates for cybersecurity measures within the financial services industry.
Austin Anton
Bank Policy Institute
austin.anton@bpi.com