The Federal Reserve Board is seeking feedback on a proposal to amend its requirements for banks to maintain anti-money laundering programs.
The proposed amendments are intended to align with changes to anti-money laundering program requirements separately proposed by four other federal regulatory agencies.
The proposal would require banks to focus their anti-money laundering resources based on risk, with more attention given to higher-risk customers and activities. Further, the proposed amendments would also require banks to incorporate the Financial Crimes Enforcement Network’s anti-money laundering priorities into their risk assessment processes.
Under the proposal, once a bank has established an anti-money laundering program, the Federal Reserve would focus supervision and enforcement activities on significant failures to implement the program.
“A central objective of the Board’s and the Agencies’ BSA modernization efforts is to create an AML/CFT supervisory and regulatory regime that is more effective in achieving the purposes of the BSA and culminating in the development of highly useful information related to illicit financial transactions for law enforcement and national security agencies. The proposed rule would further that objective by explicitly defining the requirements for a bank to establish and maintain an effective AML/CFT program. It would also adopt into regulations the AML Act’s expectation that AML/CFT programs should be risk-based, including ensuring that banks direct more attention and resources toward higher-risk customers and activities, consistent with the risk profile of the bank, rather than toward lower-risk customers and activities,” the notice states.
Further, the proposed rule would require banks to establish and maintain effective AML/CFT programs and define the requirements for doing so.
“In order for an AML/CFT program to be effective, the proposed rule would require a Board-supervised bank to establish an AML/CFT program and then maintain the AML/CFT program by implementing, in all material respects, the established AML/CFT program,” the notice said.
In addition, the proposal would also require a Board-supervised bank to establish an ongoing employee training program and independent AML/CFT program testing as part of its AML/CFT program.
“Finally, the proposed rule would require a Board-supervised bank to designate an individual responsible for establishing and implementing the AML/CFT program and coordinating and monitoring day-to-day compliance; that individual would be required to be located in the United States and accessible to, and subject to oversight and supervision by, FinCEN or its designee and the Board,” the notice said.
It points out that having an effective AML/CFT program would be more than a one-time adoption of a risk-based set of internal policies, procedures, and controls. Rather, a bank would be required to keep its risk-based set of internal policies, procedures, and controls—and the risk assessment processes that inform them—current as the bank’s risk profile changes.
The Board welcomes comment on all aspects of its analysis. In particular, the Board requests that commenters describe the nature of any impact on small entities and provide empirical data to illustrate and support the extent of the impact. Comments on the proposal are due 60 days after publication in the Federal Register.