Financial Crime World

Suspicious Activity Reports Raise Concerns Over Financial Institution Compliance

The Financial Crimes Enforcement Network (FinCEN) has proposed new regulations aimed at strengthening anti-money laundering (AML) and counter-terrorist financing (CFT) programs for financial institutions. However, the proposal has raised concerns over its impact on private resources, innovation, and regulatory burdens.

Proposed Rule Requirements

Under the proposed rule, financial institutions will be required to:

  • Conduct risk assessments that take into account feedback from law enforcement and emerging risks identified through payments returned or flagged by other financial institutions
  • Document their risk assessment analyses and subject them to oversight and governance

Risk-Based Approaches

While FinCEN emphasizes the importance of risk-based approaches, critics argue that the proposal lacks clear parameters for institutions seeking to prioritize among existing money laundering and terrorism financing risks. This lack of clarity may lead to regulatory burdens and derisking concerns.

Concerns Over Clarity

The proposed rule also fails to provide guidance on how financial institutions should address AML/CFT priorities published by FinCEN in 2021. The priorities list many significant money laundering/terrorist financing threats, but do not point to a single threat or group of threats as taking priority over the others.

Innovation Concerns

The proposal does little to promote innovation in AML/CFT programs. While FinCEN encourages institutions to consider innovative approaches to comply with BSA requirements, it also states that innovation should be “warranted by the financial institution’s risk profile.” This language may discourage institutions from pursuing innovative solutions.

Harmonization of Program Requirements

The proposed rule aims to harmonize program requirements across different types of financial institutions. However, some institutions will face additional or different obligations relating to certain program components, such as board oversight and approval of AML/CFT programs.

Conclusion

Overall, the proposed rule has raised concerns over its impact on private resources, innovation, and regulatory burdens. It remains to be seen how the final rule will address these concerns and what implications it will have for financial institutions.