On December 3, 2018, the US Department of the Treasury’s Office of Terrorism and Financial Intelligence, the federal depository institutions regulators1 and the Financial Crimes Enforcement Network (FinCEN) (together, the Agencies) issued a joint statement (the Statement) focused on private sector innovation regarding compliance with Bank Secrecy Act/Anti-Money Laundering (BSA/AML) legal and regulatory obligations.2 The Statement provides specific examples of innovation, “including new ways of using existing tools or adopting new technologies, [which] can help banks identify and report money laundering, terrorist financing, and other illicit financial activity.”3
The Statement encourages banks, credit unions and savings associations to design and test the implementation of “innovative approaches” to better meet their BSA/AML compliance obligations. Such proposed strategies include:
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The development of internal financial intelligence units devoted to identifying complex illicit finance vulnerabilities and threats, and
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The use of artificial intelligence and digital identity technologies to further secure customer information and identify potential illicit transactions.
Willing participants in “pilot programs” incorporating these innovative approaches can expect feedback from the Agencies; however, participation in pilot programs “should not subject banks to supervisory criticism even if the pilot programs ultimately prove unsuccessful.” Similarly, pilot programs that reveal gaps in a bank or a credit union’s BSA/AML compliance program “will not necessarily result in supervisory action with respect to that program.” Therefore, the fact that banks choose to test a pilot program or engage in an innovative compliance effort will not serve as automatic evidence that the banks’ existing processes are deficient. Instead, the Agencies will grade the adequacy of banks’ existing BSA/AML compliance independent of the success or failure of the pilot programs.
The Statement also announced a renewed commitment by the Agencies to engage with the private sector to combat illicit financial activities, including a willingness to discuss potential pilot programs with bank management and consider requests for exceptive relief relating to the testing and potential use of new innovative technologies.
The Statement should give banks and credit unions some comfort in exploring creative means of combating illicit financial activities and, ultimately, complying with their BSA/AML obligations. Banks can use the examples listed in the Statement as a starting point for discussions within their own institutions. Banks also should focus on long-term BSA/AML compliance strategies, keeping in mind that actually implementing a technologically advanced compliance program will require resources and management buy-in. Once developed, however, AML compliance personnel should be prepared to adequately supervise any new technological enhancements, and to explain the role of new technologies during future regulatory examinations or investigations of BSA/AML compliance.
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1 Includes FinCEN, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency. The Agencies issued a related joint statement on October 3, 2018, focused on sharing of BSA resources. See Interagency Statement on Sharing Bank Secrecy Act Resources (Oct. 3, 2018), https://www.fincen.gov/sites/default/files/2018-10/Interagency%20Statement%20on%20Sharing%20BSA%20Resources%20-%20%28Final%2010-3-18%29%20%28003%29.pdf.
2 Joint Statement on Innovative Efforts to Combat Money Laundering and Terrorist Financing (Dec. 3, 2018),
https://www.fincen.gov/sites/default/files/2018-12/Joint%20Statement%20on%20Innovation%20Statement%20%28Final%2011-30-18%29_508.pdf.
3 FinCEN Press Release, Treasury’s FinCEN and Federal Banking Agencies Issue Joint Statement Encouraging Innovative Industry Approaches to AML Compliance (Dec. 3, 2018), https://www.fincen.gov/news/news-releases/treasurys-fincen-and-federal-banking-agencies-issue-joint-statement-encouraging.
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