Comptroller Curry Discusses Banks’ Progress in Meeting BSA Compliance Obligations; States that Senior Executives and Boards Should be Held Accountable for BSA Compliance Failures

by Goodwin
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In a speech presented to the Association of Certified Anti-Money Laundering Specialists on March 17, 2014, Comptroller of the Currency Thomas J. Curry said that the OCC is seeing progress in terms of the priority that senior managers of large banks is giving to Bank Secrecy Act (“BSA”) – Anti-Money laundering (“AML”)/compliance.  The Comptroller noted that nonetheless, over the past five years there have been many significant BSA compliance failures by large banks, and those deficiencies have been the focus of a great deal of media attention. 

Historically, OCC enforcement actions for such BSA/AML compliance system deficiencies have been brought against the applicable bank rather than against its senior executives or board.  BSA/AML compliance failures have been attributed to “the collective decision making of a great many people over a long period of time.”  When significant civil money penalties are assessed against a bank or the management component of the bank’s CAMELS rating is lowered, those sanctions are absorbed by the bank’s shareholders or the bank itself rather than by accountable senior managers, said Comptroller Currency.  Comptroller Curry said, however, that when the OCC looks “at the issues underlying [a bank’s] BSA infraction, they can almost always be traced back to decisions and actions of the institution’s Board and senior management.”  The underlying BSA/AML compliance deficiencies, said Comptroller Curry, fall into four categories:

  • The bank’s culture of compliance;
  • The resources committed by the bank to BSA compliance;
  • The strength of the bank’s information technology and monitoring processes; and
  • The quality of the bank’s risk management processes.

These four areas, said the Comptroller, receive a great deal of attention from senior management, including the Chief Executive Officer, which is why when the OCC discovers lapses in a bank’s BSA compliance record, the bank’s CAMELS rating for the management component is adversely affected. To “walk the talk” on the importance of BSA compliance, a bank’s board and senior management need to have a record of:

“providing increased resources, increasing the authority and stature of the BSA Officer within the organization, and ensuring proper incentives are incorporated throughout the organization, including the business lines.”

Comptroller Curry posed the question of whether the OCC, as a bank’s supervisor, should “demand that institutions designate and hold senior managers responsible for BSA risk management just as they would for any other activity or line of business?” While it is usually easy to determine accountability and lines of responsibility at community banks, the Comptroller stated that “[a]t large, complex, globally active institutions, where we have heightened expectations, it is much less clear and those lines are often blurred.” Comptroller Curry stressed that when he called for direct accountability of senior managers, he was not calling for criminal prosecution of bank senior managers because the determination of whether a criminal prosecution is warranted is “solely the responsibility of law enforcement.”

Comptroller Curry concluded the portion of his remarks concerning bank senior manager accountability for BSA compliance deficiencies by stating:

“Where there has been a serious breakdown in BSA compliance as a result of a conscious decision not to commit the requisite resources and expertise necessary to maintain a program that meets the requirements of the law, someone has to be accountable.”

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

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Goodwin
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