On October 3, 2018, the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN) (the Agencies), issued a statement giving certain financial institutions the ability to collaborate on Bank Secrecy Act (BSA)/Anti- Money Laundering (AML) requirements. The Agencies believe increased collaboration would be suitable for banks with a community focus, less complex operations, and lower-risk profiles for money laundering or terrorist financing, in order to increase the efficiency and efficacy of their BSA/AML efforts while reducing costs.
Types of collaboration among banks could include, but isn’t limited to, pooling human, technology and other resources to fulfill the requirement of a banks BSA/AML compliance program such as:
- Internal monitoring (reviewing, updating, and drafting BSA/AML policies and procedures; reviewing and developing risk-based customer identification and account monitoring processes; and tailoring monitoring systems and reports for the risks posed)
- Independent Testing
- Training
However, the Agencies’ statement does caution against collaboration on one element of the BSA/AML compliance program, the BSA Officer. The Agencies note it may not be appropriate to share a BSA Officer due to the confidential nature of suspicious activity reports, managing coordination and facilitation of each bank’s daily BSA/AML compliance functions, and potential challenges the BSA Officer may have communicating with each bank’s board of directors and senior management.
If a bank does consider collaborating with other banks there are key risks to consider and necessary controls that should be built into the arrangement to mitigate those risks. Such controls include, but aren’t limited to: considering legal restriction; instituting oversight mechanisms by board and senior management; contractual agreements; and confidentiality agreements. The Agencies state that banks should approach these arrangements with due diligence and consideration of risk and benefits. As always, it is important to remember that the ultimate obligation and risk lies with each financial institution.
Banks should consult their primary regulator before entering into an agreement to share BSA resources.
The Interagency statement is available here.