Washington, D.C. — The Federal Reserve’s anti-money laundering and countering the financing of terrorism program proposal diverges from its counterpart proposals from the other banking agencies, promoting inconsistency in AML/CFT examination, the Bank Policy Institute and The Clearing House Association said in a comment letter today. While significant parts of the Fed’s proposal align with constructive measures in the other agencies’ proposals, the Fed leaves a crucial gap by failing to give Treasury’s Financial Crimes Enforcement Network a coordinating role in AML/CFT examination.
“The banking agencies, including the Federal Reserve, are making meaningful reforms to AML/CFT supervision and enforcement. Redirecting examiners’ focus to the most material risks will strengthen the integrity of the U.S. financial system amid a heightened geopolitical threat environment. While much of the Fed’s proposal aligns with these pragmatic reforms, the decision to abrogate FinCEN’s central role in AML examination would enable conflicting examiner mandates and ultimately undermine reform efforts.” – BPI
Higher Risks in Focus. The Fed’s proposal aligns with FinCEN and the other banking agencies’ proposals in its mandate for banks to “direct more attention and resources toward higher-risk customers and activities, consistent with the risk profile of the bank, rather than toward lower-risk customers and activities.”
- The Fed proposal would also raise the threshold for significant supervisory or enforcement actions based solely on implementation deficiencies.
Key Divergence. However, the Fed’s proposal deviates from the other agencies’ proposals in ways that could undermine the effectiveness of proposed AML/CFT reforms by misaligning Fed AML/CFT enforcement with that of FinCEN. The Fed proposal would:
- Omit a consultation framework allowing FinCEN to review an AML/CFT enforcement action or significant supervisory action prior to the Fed initiating it.
- Fail to authorize Board-supervised banks’ sharing of confidential supervisory information with FinCEN related to AML/CFT supervisory actions.
These two provisions reinforce the critical coordinating role that FinCEN plays across AML/CFT supervision.
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About Bank Policy Institute
The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud and other information security issues.
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