Transaction Monitoring

Second Post in a Three-Post Series Regarding Recent Regulatory Action by FinCEN

On September 16, 2020, the Financial Crimes Enforcement Network (“FinCEN”) issued an Advance Notice of Proposed Rulemaking (“ANPRM”) soliciting public comment on what it describes as “a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (“BSA”).” As stated, the job which FinCEN created for itself that resulted in the ANPRM was not a small one: “to re-examine the BSA regulatory framework and the broader AML regime.”

The ANPRM seeks to help modernize the current BSA/AML regime – modernization being a frequent theme of public comments by FinCEN Director Ken Blanco, as we have blogged. Indeed, the U.S. Department of Treasury’s 2020 National Strategy for Combating Terrorist and Other Illicit Financing calls for AML modernization, in order to “[l]everag[e] new technologies and other responsible innovative compliance approaches to more effectively and efficiently detect illicit activity.” Meanwhile, and as we have blogged, Congress has been contemplating various proposals for BSA/AML reform for some time (see here, here, here, here and here).

Despite its broad language, however, the ANPRM essentially boils down to a potential amendment requiring those financial institutions already required under the BSA to have an AML compliance program to formally include a risk assessment as part of their program – and for the risk assessment to take into account the government’s AML priorities, which the government will announce approximately every two years. On the one hand, this proposal does not add much that is new, because the vast majority of financial institutions required to maintain AML programs already perform risk assessments in order to conduct KYC and file Suspicious Activity Reports (“SARs”). On the other hand, the ANPRM takes a standard industry practice and turns it into a new regulatory requirement, thereby increasing liability risk. The ANPRM also touches on the tension between the government creating objective requirements – which can be helpful because they add clarity – in a compliance and enforcement regime that is supposed to be flexible and “risk based.” Under any scenario, the ANPRM is important and certainly will be the focus of industry attention.

This is the second post in a series of three blogs regarding a recent flurry of regulatory activity by FinCEN. In our first post, we discussed a final rule by FinCEN extending BSA/AML regulatory requirements to banks lacking a Federal functional regulator. In our third and final post, we will discuss the publication by FinCEN of a request for comment on existing regulations regarding enhanced due diligence for correspondent bank accounts.
Continue Reading Regulatory Round Up: FinCEN Wants To Know What You Think About Modernizing the BSA/AML Regime