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Special thanks to @Emily Nelson, AAP, APRP, NCP, Manager, Payments Education for helping me write this blog!
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FinCEN® has encouraged financial institutions to include risk-based processes within the BSA/AML programs for many years. On July 3, 2024, they released a proposed rule that would codify Bank Secrecy Act/Anti-Money Laundering (BSA/AML) risk management processes. Let’s take a deeper look at the proposal.
- Statement on the purpose of an AML/CFT program requirement – This is not meant to establish new obligations or create additional costs related to BSA/CFT programs. Instead, it is intended to summarize the overarching objectives of the proposed rule, which includes creating effective, risk-based and reasonably designed AML/CFT programs. The proposal encourages innovation and reinforces risk-based programs, allowing financial institutions to focus on resources that support their risk profile.
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- Adding the term CFT into the program rules – The acronym CFT stands for “Countering the Financing of Terrorism.” Essentially, adding to AML by amending the definition to incorporate CFT would view the program as a system of internal policies, procedures and controls meant to ensure compliance with BSA and the requirements and prohibitions of 31 CFR Part X in addition to preventing an institution from being used for money laundering, terrorist financing or engaging in any other illicit finance activity.
- Defining AML/CFT priorities – This would require reviewing the AML/CFT priorities at least once every four years. The proposed expansion of the definition would support widespread adoption of regulations according to 31 U.S.C. 5318 (h)(4)(D).
- Effective, risk-based and reasonably designed AML/CFT program requirements – The AML Act safeguards national security by preventing the movement of illicit funds through the financial system. The Act also requires AML/CFT programs to be “risk-based” and “reasonably designed to assure and monitor compliance with the requirements of BSA.” This adjustment would codify the requirements of “reasonably designed” and clarify any differences to previous articulations of the AML Act. FinCEN® is proposing to apply the same set of terms to all program rules to improve consistency. The set of terms includes a risk assessment process, internal policies, procedures and controls, AML/CFT officer, training, independent testing and other components of an effective, risk-based and reasonably designed AML/CFT program.
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While we have covered the proposed changes at a high level, it is important to keep in mind the request for comment contains 45 specific questions and topics for commentary. The overall approach aims to ensure consistency related to risk management programs to protect the financial system as well as support law enforcement. Comments are due by September 3, 2024, and you can visit the links provided below to review the proposal further and to submit your institution’s comments.
https://www.fincen.gov/news/news-releases/fincen-issues-proposed-rule-strengthen-and-modernize-financial-institutions
https://www.federalregister.gov/documents/2024/07/03/2024-14414/anti-money-laundering-and-countering-the-financing-of-terrorism-programs