BPI Comments on Anti Money Laundering and Counter Terrorism Financing Program Requirements

Ladies and Gentlemen:

The Bank Policy Institute^[1] is writing to comment on the notice of proposed rulemaking issued by the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the National Credit Union Administration that would "amend the requirements that each Agency has issued for its supervised banks . . . to establish, implement, and maintain effective, risk-based, and reasonably designed Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) programs."^[2] The proposed rule is intended to align with concurrent BSA/AML program rule changes proposed by FinCEN, which are mandated by Section 6101 of the AML Act and designed to make fundamental changes to the oversight of the AML/CFT regime and ensure that "banks will not be subject to any additional burden or confusion from needing to comply with differing standards between FinCEN and the Agencies."^[3]

The proposed rule will neither implement the intent of Congress in enacting the AML Act nor facilitate a risk-based approach to identifying and disrupting financial crime. At present, the AML/CFT regime purports to be risk-based but tolerates little to no error with respect to even the most mundane, clerical, and low-risk tasks. In practice, examiners are exactingly focused on technical compliance (including, for example, documentation and reverification), rather than on effectiveness. This approach is utterly divorced from a focus on management of true risk. Yet more concerning, the status quo examination oversight of this regime does not expressly instruct institutions to dedicate efforts to detecting suspected crime or engaging in innovation to this end-efforts that are surely foundational to the integrity of the banking and financial system.

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[1] The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks, and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

[2] Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and the National Credit Union Administration, Anti-Money Laundering and Countering the Financing of Terrorism Program Requirements, Notice of Proposed Rulemaking, 89 Fed. Reg. 65242 (proposed Aug. 9, 2024) (the "NPRM").

[3]Id.at 65243; see also Financial Crimes Enforcement Network, Anti-Money Laundering and Countering the Financing of Terrorism Programs, Notice of Proposed Rulemaking, 89 Fed. Reg. 55428, 55432 (proposed July 3, 2024) (the "FinCEN NPRM") (explaining FinCEN's proposed rule is mandated by section 6101 of the AML Act and that FinCEN intends for the proposed rule to work in concert with other sections of the AML Act," including, among others, "sections 6103 (FinCEN Exchange), 6107 (Establishment of FinCEN Domestic Liaisons), and 6206 (Sharing of threat pattern and trend information)").