The Office of Comptroller of the Currency (the OCC) has published its 2019 annual report (the Annual Report), which summarized the OCC’s strategic priorities for 2019.1 The Annual Report also highlighted the OCC’s key regulatory and policy initiatives from 2019, and set forth the OCC’s overall financial management and condition in 2019. Among other things, the Annual Report addressed the compliance risks related to the Bank Secrecy Act (BSA) and other anti-money laundering (AML) regulations for financial institutions regulated by the OCC, such as banks.
The Annual Report begins with the Comptroller of the Currency, Joseph Otting, emphasizing the OCC’s consistent focus on its core strategic priorities in 2019, which included the OCC’s efforts to reduce the burden of BSA and AML compliance while protecting the financial system. Comptroller Otting acknowledged that the BSA/AML regulations “should be updated to address rapidly evolving risks, including the inappropriate use of shell companies, and to make better use of technology to protect the financial system from illicit activity.” Comptroller Otting’s remarks also recognized that financial institutions should use private sector innovation, including new uses of existing tools and adopting new technologies, to more efficiently identify suspicious activity and combat money laundering and terrorist financing.
BSA/AML Compliance Risk
The Annual Report confirmed that the compliance risks associated with BSA/AML regulations remained high in 2019 and that financial institutions such as banks need to effectively manage those risks in a global operating and regulatory environment. In addition, the Annual Report encouraged banks to adopt BSA/AML risk management systems commensurate with the bank’s products, services, customers, and geographic footprint.
The OCC’s Supervisory Priorities and Interpretive Guidance
In 2019, the OCC’s supervisory priorities continued to emphasize ongoing BSA/AML compliance. The Annual Report also summarized the relevant interpretive guidance that the OCC, along with the other federal financial regulatory agencies, has recently published related to BSA/AML compliance for financial institutions, including the following guidance:
- In October 2018, the OCC issued a joint statement with several other federal banking regulators addressing instances in which community banks with lower BSA risk profiles may decide to enter into collaborative arrangements to share resources to manage their BSA/AML obligations more efficiently and effectively.2
- In December 2018, the OCC, together with several other federal banking regulators, issued a joint statement encouraging banks to consider innovative technologies to meet their BSA/AML compliance obligations.3 According to the joint statement, these innovative technologies would improve the efficiency and effectiveness of banks’ BSA/AML programs while continuing to protect the national financial system.
- In July 2019, the OCC, together with several other federal banking regulators, issued a joint statement clarifying the existing risk-focused approach to examinations of financial institutions’ BSA/AML compliance programs.4 The joint statement was intended to increase transparency regarding the agencies’ risk-focused approach for performing BSA/AML examinations. More information about this joint statement can be found here.
In addition, and although not explicitly mentioned in the Annual Report, we briefly note that the OCC recently issued a joint statement along with several other federal banking regulators in December 2019, and this joint statement clarified suspicious activity report (SAR) filing requirements for banks providing financial services to hemp-related businesses.5 More information about this joint statement can be found here.
What’s Next for the OCC and BSA/AML Compliance?
The Annual Report confirms that BSA/AML compliance remained a core strategic priority for the OCC in 2019 and will continue to remain as such in 2020. More specifically, the OCC appears to be very focused on encouraging financial institutions such as banks to adopt innovative technologies to manage their BSA/AML compliance risks, and this trend should continue in 2020 as technological solutions evolve even further.
While the Annual Report does not establish any new BSA/AML requirements, it reiterates that financial institutions should devote adequate resources, both internally and externally, towards BSA/AML compliance. The OCC clearly identified the BSA/AML compliance risk as “high,” and financial institutions should be prepared to tailor their BSA/AML compliance programs to their specific business model and customer base.