Letter to the Board on the Proposed Rule on AML/CFT Program Rule

Dear Chairman Warsh:

The American Bankers Association commends the proposal by the Board of Governors of the Federal Reserve System (FRB or Board) to modernize and reform Bank Secrecy Act (BSA) compliance obligations for Board-regulated banks. With one notable exception, this proposal mirrors the anti-money laundering and countering the financing of terrorism (AML/CFT) program changes recently proposed by Treasury's Financial Crimes Enforcement Network (FinCEN), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA) applicable to banks and other financial institutions. To better achieve the promise of these improvements, we recommend that FRB’s proposal incorporate the FinCEN consultation provision included in the FinCEN, OCC and FDIC proposals, and adopt the additional changes we previously proposed to FinCEN and the other federal banking agencies before all the rules are finalized, as discussed below.

I. Summary of the Comment

The FRB's proposed reforms to the AML/CFT or BSA program rules advance the core objectives of the Anti-Money Laundering Act (AMLA), the first major overhaul of the BSA in more than two decades. ABA strongly supports this effort to reform rules that interfere with banks' ability to operate dynamic, responsive BSA compliance programs that direct resources to higher-risk customers and activities and away from lower-risk customers and activities. FRB’s proposal, like that of its fellow federal banking agencies, also helps ensure that BSA requirements do not elevate duplicative paperwork and technical compliance over the core goal of detecting and combating illicit finance.

If adopted, these proposals would collectively, for the first time, expressly permit banks to allocate BSA compliance resources based on risk, and establish a floor and corresponding safe harbor from significant supervisory and civil enforcement actions. Should the Board include a provision requiring certain consultations with FinCEN, as its fellow federal banking agencies did and ABA requests FRB also adopt, this proposal would promote greater coordination between FinCEN and the federal banking agencies. It would also effectively incorporate FinCEN’s consideration of mitigating factors, such as a bank’s adoption of innovative approaches—support for innovation that is otherwise absent from the proposed rule. Overall, the proposal reflects a welcome shift toward highly useful outcomes rather than prescriptive processes.

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