Financial Crime World

Banking Regulations Tighten in US Minor Outlying Islands

Financial institutions operating in the United States Minor Outlying Islands are facing increased regulatory scrutiny over their Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) compliance programs. The heightened risk standards emphasize the importance of robust compliance programs to effectively mitigate financial crime risks.

Regulatory Concerns

Regulatory authorities, including:

  • Federal Reserve Board (FRB)
  • Federal Deposit Insurance Corporation (FDIC)
  • Office of the Comptroller of the Currency (OCC)
  • Financial Crimes Enforcement Network (FinCEN)
  • Securities and Exchange Commission (SEC)

have issued guidance and alerts highlighting areas of concern. These include allegations of:

  • Failing to implement effective AML programs
  • Violating BSA customer identification program rules
  • Having deficient third-party risk management controls
  • Engaging in unsafe or unsound practices related to AML/BSA internal controls and sanctions compliance

Key Areas of Focus

Regulators are focusing on several key areas, including:

Data Lineage and Quality

  • Institutions must demonstrate the traceability of customer and transaction-level data across business processes, systems of record, and systems of origin.

Transaction Monitoring

  • Effective transaction monitoring and surveillance systems, processes, and controls are expected to show increased accuracy and consistency.

Expanded Threats

  • Regulators are highlighting the importance of skills and talent in AML/BSA reviews, investigations, and escalations. Institutions must ensure that their staff have the necessary core skills and backgrounds to execute day-to-day operations effectively.

Recent Regulatory Issuances

Recent regulatory issuances underscore the heightened expectations for financial institutions to adhere to AML/BSA/CFT requirements. These include:

  • Updates to the Bank Secrecy Act/Anti-Money Laundering Examination Manual
  • Risk alerts from the SEC and FFIEC
  • Upcoming rulemaking proposals influenced by the Anti-Money Laundering Act of 2020 and the Corporate Transparency Act of 2020

Implications for Institutions

Institutions operating in the US Minor Outlying Islands must stay up-to-date with the latest regulations to mitigate sanctions-related risks, particularly when relying on third parties. It is crucial for these institutions to understand regulatory expectations and requirements to implement robust compliance programs capable of effectively mitigating financial crime risks.