On October 3, 2018, a group of federal bank regulators and FinCEN announced in a joint statement that banks and credit unions could collaborate and share resources to manage their Bank Secrecy Act (“BSA”) and anti-money laundering (“AML”) obligations. A collaborative arrangement does not modify or abrogate any of the bank’s BSA/AML obligations, and the joint statement merely provides examples and guidance for how banks can manage their obligations more effectively and efficiently.
Banks that may be best served by a collaborative arrangement are those with a community focus, and lower-risk profiles for money laundering or terrorist financing. Utilizing a collaborative arrangement requires each bank to carefully consider its own individual risk profile. In light of sound principles of corporate governance and bank safety and soundness, each bank should enter into such an arrangement only after conducting appropriate due diligence, including adequate documentation, evaluation of legal restrictions on such an arrangement, and establishment of appropriate oversight.
Nothing in the joint statement alters the four pillars of a bank’s BSA/AML compliance program: (1) a system of internal controls to ensure ongoing compliance; (2) independent testing of BSA/AML compliance; (3) designating a BSA compliance officer; and (4) training appropriate personnel. With appropriate limits, each of these pillars can be addressed through a collaborative arrangement.
Sharing resources through a collaborative arrangement helps banks to meet their BSA/AML compliance obligations by providing access to specialized expertise, at reduced cost, that may be difficult to obtain in some markets. The joint statement provides examples of how collaborative arrangements can be utilized to meet a bank’s BSA/AML compliance needs.
- Internal Controls – Banks can work collaboratively to develop BSA/AML policies and procedures, including risk-based customer identification and account monitoring systems.
- Independent Testing – Some banks may have difficult identifying an employee to conduct an independent set of the BSA/AML compliance program. A collaborative arrangement allows personnel at one bank to conduct the independent test at another bank. Banks should ensure that appropriate safeguards are in place to ensure confidentiality.
- Designating a BSA Compliance Officer – This pillar may not be appropriate for a collaborative arrangement because of the risks to the confidentiality of suspicious activity reports and the need for coordination of day-to-day BSA/AML compliance needs. Further, a BSA officer of more than one bank may have difficulty establishing effective communication channels with each bank’s board and senior management. It may be more feasible for such an arrangement if the banks are affiliated.
- Training Personnel – The availability and cost of an effective and qualified BSA/AML instructor may be a challenge in some markets. A collaborative arrangement may help banks to hire the right person needed to appropriately train bank personnel.