Over the past several years, banks and other financial institutions have increasingly directed their Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) due-diligence efforts toward cash-intensive businesses that have a heightened level of risk of becoming a party to money laundering or terrorist financing activities – whether intentionally or unwittingly. Often, gaming enterprises are the focus of this attention. These due-diligence efforts have in some cases resulted in financial institutions opting not to do business with casinos.
In an effort to provide clarity and improve transparency, the Financial Crimes Enforcement Network (FinCEN) and its regulatory partners have issued a joint statement emphasizing their risk-focused approach to satisfying their due-diligence examinations of bank compliance programs. The guidance notes:
- A bank’s well-developed risk assessment is a critical part of sound risk management and assists examiners in understanding the bank’s profile.
- Banks determine the levels and types of risks that they will assume.
- Banks that operate in compliance with applicable law, properly manage customer relationships and effectively mitigate risks are neither prohibited nor discouraged from providing banking services.
- Banks are encouraged to manage customer relationships and mitigate risks based on customer relationships, rather than decline to provide banking services to entire categories of customers.
The risk-based approach to supervision enables banks to devote their compliance resources toward the areas of greater risk, making it more difficult for illicit actors to abuse the financial system. The joint statement does not create additional requirements or supervisory expectations for banks.
Risk-focused BSA/AML examinations consider a bank’s unique risk profile. The extent of examination activities necessary to evaluate a bank’s compliance program generally depends on the bank’s risk profile and the quality of its risk-management processes to identify, measure, monitor, and control risks, and to report potential money laundering, terrorist financing, and other illicit financial activity.
Questions about this topic? Please contact Joe Smith in our Audit & Assurance Department at 505.998.3216.
