BPI Objects to ‘Check the Box Status Quo’ in Overhaul of Illicit Finance Rules

BPI comments on proposed rule updating AML/CFT programs

Washington, D.C. - The Bank Policy Institute reiterated serious objections to regulators' approach to updating illicit finance rules in a letter sent today to the prudential regulators. The Anti-Money Laundering Act of 2020 requires regulators to work with the Financial Crimes Enforcement Network and banks to strengthen anti-money laundering and combating the financing of terrorism programs. While the goal is to improve the effectiveness of AML/CFT programs by leveraging technology and transitioning to a risk-based approach, the proposal instead continues to primarily focus on documentation and check-the-box exercises.

"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," the letter states. "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 … rather than on effectiveness. This approach is utterly divorced from a focus on management of true risk."

BPI's comment letter makes four recommendations:

1. Encourage banks to match their response to an activity's risk. The risk of an activity should dictate the number of resources a bank deploys. Banks should have the authority to shift resources to high-risk activities to better support law enforcement, and the discretion to design a program unique to each institution.
2. Set clear expectations regarding timelines. The proposal requires banks to update their risk assessment based on opaque timelines and triggers such as "on a periodic basis" or whenever there are "material changes." This creates confusion for banks and regulators and perpetuates the misguided notion that banks employ only a single assessment. Instead, periodic updates should be left up to each bank.
3. Allow banks to deploy additional resources, where most effective and efficient. Banks should be encouraged to continue to leverage offshore personnel to carry out U.S. AML/CFT functions so long as the bank's chief program officer for the U.S. AML/CFT program is domestic and subject to U.S. jurisdiction and oversight.
4. Extend the implementation timeline to two years. Extend the implementation timeline from six months to at least two years to accommodate necessary updates to trainings, processes and controls.

The letter was submitted to the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve, the Federal Deposit Insurance Corporation and the National Credit Union Administration. Today's comments echo BPI's concerns outlined in a letter submitted to FinCEN on September 4, 2024.

To access a copy of the letter, please click here.

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About Bank Policy Institute.

The Bank Policy Institute (BPI) is a nonpartisan public policy, research and advocacy group, representing the nation's leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation's small business loans, and are an engine for financial innovation and economic growth.

Media Contact

Sean Oblack
Bank Policy Institute
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