AML/CFT proposals address outcomes, not technical compliance

New proposals are intended to fundamentally reform financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs under the Bank Secrecy Act (BSA). NCUA and federal financial regulators issued a proposal Tuesday to amend requirements for institutions’ AML/CFT programs.

The proposal:

• Reinforces a risk-based approach, requiring focus on higher-risk members and activities rather than lower-risk areas;
• Establishes core program requirements, including incorporating customer due diligence and requiring a US-based AML/CFT officer accessible to regulators;
• Clarifies that programs must be maintained, and that only significant or systemic failures would trigger major supervisory or enforcement actions; and
• Expands FinCEN’s role by requiring consultation with regulators and allowing broader information sharing on supervisory and enforcement matters.

The regulators’ proposal aligns with a separate proposal issued by FinCEN Tuesday to promote risk-based, reasonably designed programs and greater consistency in how financial institutions are evaluated for effectiveness and AML/CFT compliance. FinCEN’s proposal shifts expectations toward effectiveness and outcomes, not simply technical compliance with program requirements.

Comments are due within 60 days, and America’s Credit Unions will issue Regulatory Comment alerts on the proposals.