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

  • by Amber Goodrich
  • Jun 07, 2018

In our last Compliance Advisor blog post, we pointed out two reasons why financial institutions should be optimistic about a revised BSA on the horizon. Now, let's look at three more.

Lawmakers Are On Board

Late last year, U.S. Reps. Steve Pearce, R-NM, and Blaine Luetkemeyer, R-MO, introduced a draft bill addressing many of the consensus issues related to the BSA, including many of the ideas outlined in The Clearing House study. Among other things, the Counter Terrorism and Illicit Finance Act (CTIFA) calls for the following:

  • Increase CTR threshold to $30,000
  • Increase SAR threshold to $10,000
  • Streamline and/or integrate CTR and SAR requirements
  • Improve information sharing between all parties involved
  • Encourage the use of technological innovations to comply with the BSA

According to American Banker, the House held a hearing on the bill in April. Its sponsors suggested making FinCEN responsible for collecting beneficial ownership information, an apparent acknowledgement of the difficulties facing financial institutions as they attempt to comply with FinCEN’s recently effective Customer Due Diligence Rule.

Then in early May, American Banker reported that House Speaker Paul Ryan announced a deal between lawmakers. The House would approve a Senate bill scaling back parts of the Dodd-Frank Act, in exchange for the Senate considering various House regulatory relief bills, such as CTIFA or other BSA-related bills. The House followed through on its end of the bargain on May 22, when it passed The Economic Growth, Regulatory Relief and Consumer Protection Act.

BSA Reform Has Bipartisan Support

Adding to, and potentially sealing, this growing momentum for a BSA revision is support from Democratic lawmakers. First, CTIFA’s third sponsor in the House is Rep. Carolyn Maloney, D-NY. Second, American Banker indicates that, “Democrats including Representative Dennis Heck of Washington, said during the (April) hearing that bankers in his district say the most ‘frustrating’ item for them is AML compliance.”

Finally, and perhaps the biggest surprise, is the fact that Sen. Elizabeth Warren, D-MA, a lawmaker who typically seeks more regulation rather than less, has indicated support for CTIFA, according to Ballard Spahr’s Money Laundering Watch and Reuters. Both report that during a hearing about the bill, Senator Warren said, “We need to rethink a lot of our money laundering laws, some of which . . . were written back in the 1970s and are badly out of date.”

“Most observers said they expect Congress will be able to pass changes to AML regulations now that there is greater bipartisan support, partly driven by broad concerns about the incoming beneficial ownership rule and the increase in digital transactions,” according to American Banker.

Technology Provides Some of the Answers

As noted above, CTIFA encourages the use of technology to ease BSA/AML requirements. Many banks already use existing technology to conduct particular pieces of their compliance, including watchlist screening solutions, customer identification program (CIP) verification services and transaction monitoring systems.

However, there is emerging technology that could provide additional relief. Until recently, one of the gaps in existing technology was the inability to integrate information between the various systems. Human resources have had to tackle that exhaustive job, but breakthroughs in artificial intelligence (AI) are on the cusp of changing that.

Corporate Compliance Insights claims that, “AI is transforming key elements of the AML workflow and delivering an order of magnitude in performance improvements in the process.” AI has the potential to significantly reduce false positives and false negatives, which means that banks will “spend fewer resources and catch more bad actors.” FICO.com agrees: “When the sheer computing power of AI meets the transactional complexity of AML, good things happen.”

Change Appears to Be Coming, But to What Extent

Many experts believe all of this momentum will likely lead to change, but there are still obstacles that could impact the extent of that change.

Reuters warns that consumer groups may raise legal challenges to regulatory relief, while “Conservative Republicans also raise concerns that proposed changes to anti-money laundering rules would push more of the compliance burden onto small businesses.”

And given today’s political climate, there is always a chance that the current bipartisan accord relating to the BSA will get caught up and broken down by other issues with less or no bipartisanship.

Finally, there is this: While Otting is leading the charge to update the BSA, the OCC does not have rulemaking authority over it. That belongs to FinCEN, and its recent BSA award celebration, which recognized the significance of BSA reporting by financial institutions, suggests that it still strongly believes in the overall value of the law as it exists today.

The ideal scenario for the industry is a BSA overhaul, but even if that doesn’t happen or only minor tweaks are made to the law, the developments in AI are still expected to bring significant compliance relief—and hopefully help ring in a better BSA.

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).