States offer insights into improving AML effectiveness

(Nov. 20, 2020) The state system made several recommendations for improving anti-money laundering (AML) effectiveness in a comment letter to federal law enforcement, responding to a call for comments issued in September. 

That month, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued an advance notice of proposed rulemaking (ANPR) seeking views on how to establish an “effective and reasonably designed” anti-money laundering program by amending its rules. FinCEN stated then that the amendments under consideration “are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs.”

Specifically, FinCEN said its proposed amendments would clarify that an “effective and reasonably designed” AML program would assess and manage risk according to the institution’s own risk assessment process; provide for compliance with BSA requirements; and provide for the reporting of information with a high degree of usefulness to government authorities.

In its comment letter filed this week, NASCUS told the agency that the state system:

  • Supports efforts to better harmonize expectations among regulators and credit unions as to the sufficiency of AML efforts and a credit union’s overall AML program.
  • Recommends an explicit requirement for a risk assessment be limited to conducting one upon which the AML program is based and documenting the risk assessment. “FinCEN should allow institutions to determine the needed frequency of updating the risk assessment as well as the methodology and format of the risk assessment,” NASCUS wrote.
  • Encourages FinCEN to publish its AML priorities, but cautioned against requiring those priorities to be incorporated into the risk assessment.
  • Understands from stakeholders that the currency transaction report (CTR) exemption process is too burdensome, and said NASCUS encourages FinCEN to explore ways to ease the process for credit unions to exempt qualifying credit union members from CTR filing obligations.
  • Recommends that on-going suspicious activity report (SAR) filing requirements be extended from 90-days to a 180-day or even annual filing requirement. “Covered entities would still be required to monitor the accounts and include a transaction history in the extended refiling,” NASCUS wrote. In addition, the association stated, should the nature of the transactions change, or new information become available, an SAR could be filed ahead of the 180-day (or annual) re-filing deadline.

NASCUS comment letter: ANPR, Anti-Money Laundering Program effectiveness