Getting to Effectiveness – Report on U.S. Financial Institution Resources Devoted to BSA/AML & Sanctions Compliance

In 2018, the Bank Policy Institute undertook an empirical study to better understand the resources U.S. financial institutions are devoting to Bank Secrecy Act, anti-money laundering and sanctions compliance, and whether these resources are efficiently and effectively supporting law enforcement and national security efforts. The purpose of the Bank Secrecy Act, which was enacted in 1970, is to require certain reports or records that have a “high degree of usefulness” to law enforcement or national security officials. Yet, very little is known about what records and reports are highly useful to law enforcement.

This study is intended to assist public sector efforts to address the outdated and misaligned nature of the current AML/CFT regime as well as any subsequent reviews of the sanctions regime that may be contemplated by the U.S. Department of the Treasury.   Nineteen BPI members participated in this study, with asset sizes ranging from approximately $50 billion to over $500 billion.  To better understand institutional resources devoted to effectiveness, where appropriate, responses were categorized and analyzed based on the following categories: (i) small institutions were defined as having approximately $50 to 200 billion in U.S. assets; (ii) midsize institutions were defined as having $200 to 500 billion in U.S. assets; and (iii) large institutions were defined as having over $500 billion in U.S. assets.  The survey targeted areas where empirical data could be sought to better understand the performance of the AML/CFT and sanctions regimes.

Most notable the results found that:

  • Survey participants are employing over 14,000 individuals, investing approximately $2.4 billion and utilizing as many as over 20 different I.T. systems per institution to assist them with BSA/AML compliance;
  • In 2017, survey participants reviewed approximately 16 million alerts, filed over 640,000 suspicious activity reports (SAR) and more than 5.2 million currency transaction reports (CTR), and institutions that record data regarding law enforcement inquiries reported that a median of 4% of SARs and an average of 0.44% of CTRs warranted follow-up inquiries from law enforcement;
  • In 2017, survey participants that recorded alerts by activity type reported that 18% of their alerts related to structuring and 3, 545 of those structuring SARs warranted follow-up inquiries from law enforcement;
  • In 2017, survey participants reported that of approximately 2.36 million “high risk” customers, a median of roughly 6% were subject to SAR filings while 0.3% of these customers were the subject of follow-up inquiries from law enforcement; and
  • Survey participants are employing over 915 individuals, investing roughly $173 million, and utilizing 3 to 6 I.T. systems at each institution to assist them with U.S.-based sanctions compliance, yet when screening wires and customer and related party accounts for potential OFAC matches, institutions reported true matches with an overall median of 0.00004%, with some institutions reporting no true customer matches at all.