Bank Secrecy Act/Anti-Money Laundering Examination Manual Update
Change—a word we’ve all become more familiar with over the past year. With a new administration now fully in effect, financial institutions have begun wondering what new changes they can expect to see over the next four years. On February 25, 2021, the Federal Financial Institutions Examination Council (FFIEC) released numerous updates to the Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) Examination Manual (BSA/AML Exam Manual). A new section was added to the BSA/AML Exam Manual—Assessing Compliance with BSA Regulatory Requirements—and updates were completed within the following sections: Customer Identification Program (CIP), Currency Transaction Reporting (CTR), and Transactions of Exempt Persons.
The new introductory section provides a high-level overview of how examiners will complete their scope and plan for examinations. The FFIEC indicates that policies and procedures alone aren’t sufficient enough to comply with BSA regulatory requirements. The actual processes the financial institution performs must coincide with the policies and procedures it sets forth to accomplish a satisfactory BSA/AML program within the financial institution. Each financial institution is unique regarding risk associated with BSA/AML requirements; therefore, examiners tend to take a risk-based approach when completing an exam. The FFIEC notes, “During the scoping and planning process, examiners should determine on the basis of risk what, if any, specific BSA regulatory requirements to review in addition to the review of the BSA/AML compliance program. The specific examination procedures performed to assess the bank’s compliance with BSA regulatory requirements depend on the bank’s risk profile, size or complexity, quality of independent testing, changes to the bank’s BSA/AML compliance officer or department, expansionary activities, new innovations and technologies, or other relevant factors. Given that banks vary in size, complexity, and organizational structure, and have unique risk profiles, the scope of a BSA/AML examination should be tailored to each bank. Examiners should focus their review of risk management practices and compliance with BSA regulatory requirements on areas of greatest ML/TF and other illicit financial activity risks. Examiners will assess whether the bank has developed and implemented adequate processes to identify, measure, monitor, and control those risks and comply with BSA regulatory requirements.”
The updates within the CIP, CTR, and Transactions of Exempt Persons aren’t designed to be interpreted as new instructions or new or increased focuses on certain areas; rather, they aim to offer a deeper transparency into the examination process and support a more risk-focused exam. These updates to the BSA/AML Exam Manual were completed in close collaboration with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network.
Financial institutions should prepare by ensuring their board of directors and BSA/AML compliance personnel are aware of these upcoming changes and how they’ll affect the day-to-day operations.