As we approach the Labor Day weekend and the unofficial end to summer, the 2019 calendar turns to last opportunities for any successes that can be tied to this year. For the AML community, the standard calendar year doesn’t impact our work but it can dictate things such as legislation, regulation or sometimes policy. AML reform, for example, can still occur in 2020 since we are currently in the beginning of a two-year congressional session. Also, if there is a change in Administrations after the presidential election, some agency chairs will change, but not until early 2021, which could also include a shift in agency leadership and potential thematic or priority shifts.
Well, it is much easier to delay final enactment of proposals or only hear speeches about agency direction without any real change. As that is the premise, there can be real movement for this quarter of 2019 if, for legislation, there are floor votes in September; for policy changes we have a little more time.
So, to keep “score”, here is a reminder of the AML related issues from the past year and where they stand:
There seems to be a consensus among the agencies, and with Congress, that innovation will improve AML both for the private and public sectors. The federal banking agencies and FinCEN issued an advisory on this, pointing out the value to better data for suspicious activity, among other things.
The key line for me is “While banks are expected to maintain effective BSA/AML compliance programs, the Agencies will not advocate a particular method or technology for banks to comply with BSA/AML requirements.” The trick for this to work is for examiners to cease telling financial institutions what systems to use. While we understand recommending to some banks that their size may warrant a more comprehensive system, this advisory will only work if examiners are consistent. This theme being in pending legislation may help force that consistency.
How do we do it?
With a bit of fanfare, the agencies issued another advisory to try to improve AML efficiency.
(https://www.occ.gov/news-issuances/news-releases/2018/nr-ia-2018-107a.pdf)
The notion of helping community banks improve by sharing resources is an excellent goal, but to date, we have no real evidence that it is actually being used. I have asked agency officials all year for examples of how this can be utilized but all we have thus far is parts of the advisory that point out:
“It may be challenging to acquire personnel with BSA/AML expertise in some communities. It may also be cost prohibitive to attract a qualified outside BSA/AML trainer. A collaborative arrangement between two or more banks may provide the latitude to hire a qualified instructor to conduct the BSA/AML training, allowing the bank to share the cost. Examples of basic BSA/AML training topics that may be covered by shared resources include: alert analysis and investigation techniques, alert trends and money laundering methods, and regulatory updates.”
Again, the various congressional proposals are considering this concept of sharing as well.
Another major challenge to private sector AML professionals is understanding what are the regulatory expectations of the examiners with the plethora of rules, policies and “recommendations.” Confusion has been rampant since the beginning of AML/BSA compliance as to how to address guidance. Here is what the agencies have said:
(https://www.federalreserve.gov/supervisionreg/srletters/sr1805.htm)
“Examiners will not criticize a supervised financial institution for a “violation” of supervisory guidance. Rather, any citations will be for violations of law, regulation, or non-compliance with enforcement orders or other enforceable conditions. During examinations and other supervisory activities, examiners may identify unsafe or unsound practices or other deficiencies in risk management, including compliance risk management, or other areas that do not constitute violations of law or regulation. In some situations, examiners may reference (including in writing) supervisory guidance to provide examples of safe and sound conduct, appropriate consumer protection and risk management practices, and other actions for addressing compliance with laws or regulations.”
I will leave it to all of you if this paragraph and the entire “guidance” clarifies…
The congressional activity that we hope continues to progress, can make all of these previous issuances have real practical value.
We still have time…but September will tell us quite a bit.
* “Time” by the Alan Parsons Project was released in 1981 and reached #15 on the Billboard charts. Alan Parsons was also a successful recording engineer, whose credits included Pink Floyd’s “Dark Side of the Moon.”