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5 Signs Point to a Better BSA: Part 1 of 2

  • by Amber Goodrich
  • Jun 07, 2018

Lawmakers, Regulators and Industry Leaders Join in Push to Revise 1970 Law

Fewer currency transaction reports (CTRs) to file. Less time compiling suspicious activity reports (SARs). Beneficial ownership information collected by and stored within the Financial Crimes Enforcement Network (FinCEN). Technology that streamlines anti-money laundering (AML) transaction monitoring.

These are not the fantasies of a daydreaming banker or compliance officer, but actual ideas for revolutionizing the Bank Secrecy Act (BSA) that appear closer to reality each day.

In September 2017, I made The Argument for Modernizing the BSA. And now, I want to look at the significant progress made in the endeavor to revise the almost 50-year-old law, as lawmakers, regulators and industry leaders converge around the idea.

Trump’s Deregulation Stance Holds Firm

True to his campaign word, President Trump continues to fulfill his promise to reduce regulation. A key component of this strategy is carefully selecting government agency appointees. A pivotal appointment for the financial services industry is Joseph M. Otting as Comptroller of the Currency.

The former bank executive was sworn in late last year and, this spring, made his priorities known. In March, Otting began a media and industry blitz to outline his plans for the Office of the Comptroller of the Currency (OCC). In interviews given to outlets such as Bankers Digest and Independent Banker, and in talks at various industry events, such as the American Bankers Association’s (ABA) Government Relations Summit, Otting zeroed in on the BSA as one of his five focus areas.

During this media tour, he acknowledged the importance of the BSA in protecting our financial system, but he also repeatedly indicated his belief that the law has “evolved into a series of ‘gotchas’ and other unhelpful activities.” At the ABA Summit, he recognized “the massive efforts by banks of all sizes to comply with BSA reporting requirements,” which, he says, “capture far too many non-suspicious transactions.” Otting also opined that, “despite the best intentions of the industry, we’ve evolved to where this is almost impossible to comply with.”

As the new comptroller works alongside the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve (FED) on recommendations for revising the BSA to share with FinCEN, other stakeholders are working toward the same goal.

Financial Services Industry Seizes the Moment

Since President Trump took office, the industry has engaged in a serious effort to convince lawmakers and regulators of the need to modernize the BSA. Arnold & Porter, a law firm specializing in regulatory issues, welcomed Otting’s recent comments about the BSA, noting that his “sentiments echo the views of the industry generally, which has produced a number of studies and reports that offer suggestions on how to reform the current BSA/AML regime.”

These studies and reports include the following:

  • A New Paradigm: Redesigning the U.S. AML/CFT Framework to Protect National Security and Aid Law Enforcement: A February 2017 study published by The Clearing House, a banking association and payments company, argues that, “Under the current AML/CFT regime, the nation’s financial firms are effectively deputized to prevent, identify, investigate, and report criminal activity, including terrorist financing, money laundering and tax evasion.” This, despite the fact that, “many if not most of the resources devoted to AML/CMT by the financial sector have limited law enforcement or national security benefit.”
  • ABA Comment Letter:  A July 2017 response to the Treasury Department’s call for comment on regulations that could be eliminated, modified or streamlined provided a list of ideas for streamlining the BSA. These included a call for updated guidance, improved information sharing, an analysis of the value of CTRs and a revision to the SAR format.

In addition, Reuters reports that, “Lobbyists aim to sway lawmakers to sponsor deregulatory provisions that can be pegged to other upcoming must-pass legislation and pressure the agencies to push ahead with rule-easing.” The article goes on to note that, “So far, the industry has gained traction on two laws that are woefully outdated,” one of which is the BSA.

For more evidence that a revised BSA is on the horizon, read part two of this blog series.

Amber Goodrich, compliance strategist for CSI Regulatory Compliance, has more than 10 years of financial industry experience. She is a Certified Regulatory Compliance Manager (CRCM) and Certified Bank Secrecy Act (BSA) Professional (CBAP).