The Bank Policy Institute (“BPI”) has issued its comment on the Federal Functional Regulators’ (the OCC, the Board of Governors of the Federal Reserve System, the FDIC, and the National Credit Union Administration) notice of proposed rulemaking (“NPRM”) to modernize financial institutions’ anti-money laundering and countering terrorist financing (“AML/CFT”) programs (“Comment”). The agencies’ NPRM, on which we blogged here, is consistent with FinCEN’s similar and earlier AML/CFT modernization proposal (“FinCEN’s NPRM”), on which we blogged here (please also see our podcast on these regulatory proposals here).
The Comment, which generally tracks BPI’s earlier comment on FinCEN’s NPRM, is detailed and 23-pages long. We only summarize it here. The Comment is not a positive proponent of the NPRM and suggests significant changes.
Broadly, the Comment initially asserts that “[t]he 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.” Likewise, the Comment asserts that “[i]n practice, [bank] examiners are exactingly focused on technical compliance . . . rather than effectiveness. This approach is utterly divorced from a focus on management of true risk.” According to BPI, “the status quo examination oversight of [the AML/CFT] regime does not expressly instruct institutions to dedicate efforts to detecting suspected crime or engaging in innovation to this end—efforts that are surely foundational to the integrity of the banking and financial system.”
The Comment also fires a shot across the bow by suggesting the possibility of future litigation by stating – albeit in a footnote – that “BPI has significant concerns that the proposed rule does not align with the letter and spirit of the AML Act and provides for arbitrary procedural requirements that could render the rule vulnerable to challenge [under the Administrative Procedures Act].”
The Comment then dives into the details.
