Financial Crime World

Supervisory Guidance on Model Risk Management (MRMG) for Banks’ AML/CTF Requirements

The Financial Crimes Enforcement Network (FinCEN), the Office of Foreign Assets Control (OFAC), and other regulatory bodies have issued a series of statements, fact sheets, and guidance documents to provide clarity on various aspects of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CTF). These guidelines aim to assist banks in developing effective systems and models for identifying and reporting suspicious transactions.

Key Takeaways

  • Model Risk Management: FinCEN’s Supervisory Guidance on Model Risk Management (MRMG) provides guidance on the development, validation, and ongoing monitoring of models used by banks to identify and report suspicious transactions.
  • AML/CTF Requirements: The guidance emphasizes the importance of understanding AML/CTF requirements and ensuring that systems and models are designed to meet these obligations.
  • Risk Assessment: Banks must conduct a thorough risk assessment to identify potential vulnerabilities in their systems and models, and implement controls to mitigate these risks.
  • Ongoing Monitoring: Models and systems must be regularly monitored and updated to ensure they remain effective in identifying suspicious transactions.
  • Reporting Requirements: Banks must report suspicious transactions to the relevant authorities, including FinCEN’s Financial Institutions Hotline (1-866-556-3974).

Industry Response

The banking industry has responded by developing frameworks and guidance for managing financial crime risks. The Wolfsberg Group, an association of global banks, has produced a Correspondent Banking Due Diligence Questionnaire to facilitate the completion of correspondent banking questionnaires.

Regulatory Bodies

  • FinCEN: FinCEN provides guidance on AML/CTF requirements and issues alerts and advisories to help banks identify emerging risks.
  • OFAC: OFAC develops and implements strategies to combat terrorist financing domestically and internationally.
  • Basel Committee on Banking Supervision (BCBS): The BCBS addresses AML/CTF risk management and supervision issues in the banking sector.

Additional Resources

For further information, please refer to the following resources:

  • FinCEN’s Anti-Money Laundering/Countering the Financing of Terrorism technical assistance video
  • FDIC’s Technical Assistance Video Program
  • Wolfsberg Group Correspondent Banking Due Diligence Questionnaire
  • National Strategies and Risk Assessments (2022 National Strategy for Combating Terrorist and Other Illicit Financing, National Money Laundering Risk Assessment, etc.)
  • Reporting Terrorist Activity: FinCEN’s Financial Institutions Hotline (1-866-556-3974) and the U.S. Department of the Treasury’s Office of Terrorism and Financial Intelligence.

Videos/ Webcasts/Teleconferences

For archived webcasts and teleconferences on AML/CTF, please visit the following links:

  • Anti-Money Laundering/Countering the Financing of Terrorism technical assistance video
  • FDIC’s Technical Assistance Video Program

By understanding these guidelines and implementing effective systems and models, banks can better comply with AML/CTF requirements and help prevent financial crimes.