The Federal Financial Institutions Examination Council (FFIEC) recently released updates to the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual. The Council is composed of the following six voting members: a member of the Board of Governors of the Federal Reserve System; the Chairman of the Federal Deposit Insurance Corporation; the Director of the Consumer Financial Protection Bureau; the Comptroller of the Currency; the Chairman of the National Credit Union Administration; and the Chairman of the State Liaison Committee. The FFIEC was established in March 1979 to prescribe uniform principles, standards, and report forms and to promote uniformity in the supervision of financial institutions.
The Manual provides instructions to examiners for assessing the adequacy of a BSA/AML program and its compliance with BSA regulatory requirements. It also serves as a guide to financial institutions in preparation for regulatory exams. Historically, there was a lack of clarity regarding the Manual’s BSA program standards as to which standards are merely encouraged or recommended as a matter of sound banking practice and those that are required under the regulations. However, consistent with other recent pronouncements, the FFIEC emphasized that the Manual and these updates themselves do not establish requirements for financial institutions and that such requirements are instead found in statutes and regulations. The FFIEC stated that these updates to the Manual do not impose new obligations on financial institutions and should not be interpreted as new instructions or as a new or increased focus on particular areas.
According to the FFIEC, the revisions were published to provide additional transparency into the examination process and support risk-focused examination work. The revisions include updated information for examiners relating to transaction testing and provide specific examples as illustrations. Testing should be risk-focused and may take the form of testing specific transactions or performing analytical or other reviews.
The updates modify three sections of the manual:
• Customer Identification Program
• Currency Transaction Reporting
• Transactions of Exempt Persons
In addition to the revision of these sections, the FFIEC added a new introduction entitled Assessing Compliance with BSA Regulatory Requirements. This introduction is written to assist examiners in assessing compliance with BSA regulatory requirements and highlights that the scope of an examination will vary by each institution’s unique risk profile. Given the differences in size, complexity, and organizational structure, the scope of a BSA/AML examination should be specific as to each institution. Policies, procedures, processes, and practices should align with the unique money laundering, terrorist financing (ML/TF), and other illicit financial activity risks present in the institution.
New and revised sections of the Manual will be identified by a 2021 date on the FFIEC BSA/AML InfoBase soon.
Jim Phillips, EAP Managing Director, BSA/AML Compliance, Jim.Phillips@everettadvisory.com