Agencies Urge Banks to Pursue AML Compliance Innovation

Federal banking agencies urged banks to pursue innovative approaches to meeting Bank Secrecy Act/Anti-Money Laundering (“BSA/AML”) compliance obligations.

In a joint statement, the Federal Reserve Board, the FDIC, FinCEN, the National Credit Union Administration and the Office of the Comptroller of the Currency (the “agencies”) stated that innovation – including the use of artificial intelligence, digital identity technologies and internal financial intelligence units – has the potential to augment banks’ programs for risk identification, transaction monitoring, and suspicious activity reporting.

The agencies encouraged banks to test innovative programs, stating that a pilot program that fails, or a program that identifies suspicious activity that otherwise would have been overlooked, should not subject the bank to supervisory action, as long as the bank’s existing BSA/AML processes are adequate. According to the statement, FinCEN will consider requests for exceptive relief from BSA/AML regulations in order to facilitate the testing and potential use of new technologies and other innovations.

The agencies added that the implementation of innovative approaches to BSA/AML compliance will not result in additional regulatory expectations.

Lofchie Comment: The regulators’ joint statement may reflect an acknowledgment of the enormous expenses to which financial institutions have been put in complying with AML obligations and the fines that have been imposed for even unwitting failures to fulfill those obligations.

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