In an Advance Notice of Proposed Rulemaking ("ANPRM"), published in the Federal Register, FinCEN stated that the purpose of the potential amendments is to provide greater flexibility to financial institutions regarding the allocation of their resources to AML programs. The ANPRM proposed to define "an effective and reasonably designed" AML program as one that:
- identifies, assesses, and reasonably mitigates the risks resulting from illicit financial activity, consistent with both the institution's risk profile and the risks communicated by relevant government authorities;
- assures and monitors compliance with the recordkeeping and reporting requirements of the BSA; and
- provides information with a high degree of usefulness to government authorities.
Comments on the potential amendments must be submitted by November 16, 2020.
Currently, financial crime risk assessments are merely an implied requirement; many financial institutions conduct risk assessments to meet their BSA obligation of implementing a "reasonably designed" AML program. Here, FinCEN is proposing changes to the AML program obligations that would explicitly require financial crime risk assessments.
At first glance, this may not sound like a heavy lift for financial institutions that already conduct risk assessments. But FinCEN's ANPRM includes thorny questions about whether there are "ways to articulate objective criteria and/or a rubric" for regulators examining risk assessment processes and for independent testing of those processes.
Financial institutions may be accustomed to regulators and independent testers examining the outcomes of a risk assessment, but not the process itself. Given the broad range of risk-assessment approaches currently used in the market, financial institutions may need to significantly revamp existing risk assessment processes to meet any eventual "objective criteria" that regulators establish for an adequate risk assessment process.
- FinCEN Press Release: FinCEN Seeks Comments on Enhancing the Effectiveness of Anti-Money Laundering Programs
- Federal Register: Anti-Money Laundering Program Effectiveness
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