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Subcommittee Examines the BSA/AML Regulatory Compliance Regime


Washington, Jun 28 -

The Financial Institutions and Consumer Credit Subcommittee held a hearing today to examine the federal government’s anti-money laundering (AML) efforts under the Bank Secrecy Act (BSA). The primary focus of the hearing was to understand compliance challenges facing financial institutions, including compliance trends, the effectiveness of current reporting requirements, and opportunities to improve and enhance the federal government’s ability to combat money laundering and terrorist financing.

“The goals of the Bank Secrecy Act and anti-money laundering (BSA/AML) legal regime are laudable: financial institutions and government agencies should work together to prevent money laundering and terrorist financing. However, aspects of this regulation have spiraled out-of-control and resulted in a breakdown between law enforcement, financial regulators, and institutions. The de-risking seen throughout the financial services space, in part because of BSA/AML regulation, actually increases risk to the system,” said subcommittee Chair Blaine Luetkemeyer (R-MO). “We cannot afford to have an ineffective BSA/AML regime. Today’s hearing is the first step in a series to discuss improvements that could benefit law enforcement and financial institutions – while simultaneously creating a more effective BSA/AML regulatory construct.”

Key Takeaways from the Hearing:

Topline Quotes from Witnesses:

“While credit unions support laws and regulations that prevent terrorists and criminals from using their institutions to launder money or otherwise engage in illegal activity, the compliance burden of the current regulatory environment often unnecessarily takes away from our ability to serve our members. Since the 2008 economic crisis and the resulting regulations that followed, credit unions have been required to devote more resources for regulatory and legal compliance particularly for mortgage loans and other consumer products, services, and protections. Given these new requirements, it has become difficult for credit unions to absorb their current total compliance burden. The new regulatory regime makes Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulatory compliance even more daunting.” – Faith Lleva Anderson, Senior Vice President and General Counsel, American Airlines Credit Union, on behalf of the Credit Union National Association

“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. The largest firms collectively spend billions of dollars each year, amounting to a budget somewhere between the size of the ATF and the FBI. Yet the conclusion of the vast majority of participants in the process is that many if not most of the resources devoted to AML/CFT by the financial sector have limited law enforcement or national security benefit, and in some cases cause collateral damage to other vital U.S. interests – everything from U.S. strategic influence in developing markets to financial inclusion. Thus, a redeployment of those resources has the potential to substantially increase the national security of the country and the efficacy of its law enforcement and intelligence communities, and enhance the ability of the country to assist and influence developing nations.” – Greg Baer, President, The Clearing House Association, Executive Vice President and General Counsel, The Clearing House Payments Company

“As a community bank, we have seen an influx of new regulations over the past few years as well asadditional requirements under old regulations such as the Bank Secrecy Act. Clearly, BSA compliance is an important building block for our national security, but it is founded on principles that were developed nearly 50 years ago. The world has drastically changed since the BSA was adopted in 1970; criminals keep evolving and staying one step ahead of banks and law enforcement. As the United States takes steps to combat terrorism and financial crime, now would be a good time to update the compliance requirements to develop a system suited to the twenty-first century.” – Lloyd DeVaux, President and Chief Executive Officer, Sunstate Bank, on behalf of the Florida Bankers Association