Skip to Main Content

BSA Coalition Conference Highlights Emerging Issues

Supervision News Flash
August 2024
U.S. bills of varying denominations clipped to a clothesline with wooden clothespins

Every year as part of our efforts to share knowledge and insights from around the Fifth Federal Reserve District, our Richmond Fed Bank Secrecy Act/Anti-Money Laundering (BSA/AML) specialists work with the BSA Coalition, a non-profit organization formed with the primary objective of providing tools, resources and expertise to assist financial institutions in creating effective BSA/AML programs. Through our work with the BSA coalition, we have the opportunity share our thoughts and views on emerging trends and issues within the BSA/AML community.

The BSA Coalition hosts an annual conference, which typically features a regulator panel. At the June 2024 conference, I had the privilege of moderating a panel that included speakers from the Federal Reserve Board of Governors, FDIC, OCC and NCUA. We discussed the top examination issues impacting financial institutions across the Federal Reserve System and our District. Those include:

  • Customer Due Diligence (CDD) – Some programs have entire groups of like customers under the same risk rating. Leaders of these programs should be able to provide justification for this approach to risk rating of their customer base.
  • Independent Testing – While there is no specific timeframe requirement for performing the independent test, management should be able to justify their institution’s specific testing timeframe.
  • Third-Party Risk Management – This risk continues to impact most areas of operations throughout financial institutions, including BSA/AML. When partnering with a third-party it is essential for institutions to perform adequate due diligence, evaluate what information the third-party can access and the bank’s access to data from the third-party. They also need to assess if their BSA staff have the appropriate knowledge and bandwidth to manage the relationship and understand what controls their organization will have in place. The agency speakers discussed the Third-Party Risk Management: A Guide for Community Banks, which was recently created to help institutions assess their programs.

With each of these examination issues, the panelists reminded us that each institution is different, and practices and policies will vary across size, risk and complexity. Best practices across all institutions include maintaining adequate documentation of business processes and decisions.

Another emerging topic that received a lot of interest was the subject of innovation in the industry. Innovation is encouraged but not required, and we all expressed the desire to see more innovation in the BSA/AML function within institutions. When financial institutions seek to innovate, each of the agencies and the Richmond Fed recommend discussing it with your regulator as part of your change management practices.

As part of the planning for this event, we recognized that there was a pending proposal for updating requirements for BSA/AML programs of supervised institutions. The notice of proposed rulemaking was released in July following the conference, and the comment period will end in early September 2024. I’d encourage you to read the proposed rulemaking and provide thoughtful comments, as appropriate.

Another important reminder that we emphasized as part of the conference was the rollout of the Corporate Transparency ACT (CTA). Certain phases of the CTA have been implemented by FinCEN; but panelists indicated that the phase that includes an update to the CDD rule has not been released. Therefore, banks should continue to collect beneficial ownership information for their legal entity customers and continue to comply with the current CDD rule.

It was such a pleasure to participate in the BSA Coalition’s annual conference. I always enjoy hearing from others within the industry and regulatory environment, and to learn more about issues impacting our institutions. Your Supervision contact team at the Richmond Fed can connect you to our team of BSA/AML subject matter experts and help you with questions you may have implementing and continuing effective BSA/AML programs.

Phone Icon Contact Us
Banking Supervision (804) 697-8000