Fincen Provides Guidance To U.S. Financial Institutions On Creating A Strong BSA/AML Compliance Culture

On August 11, 2014, the Financial Crimes Enforcement Network (FinCEN) published an advisory (FIN-2014-A007) warning all financial institutions, regardless of size or industry sector, that a poor culture of compliance can lead to shortcomings in Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance programs. Drawing lessons from recent criminal and civil enforcement actions, FinCEN’s advisory highlights six general principles that can help establish a strong BSA/AML compliance culture at financial institutions, including ensuring that:

  • An institution’s leadership – that is, its board of directors, senior management or owners and operators – is actively engaged in compliance efforts and shows a visible, demonstrated commitment to compliance, and receives periodic BSA/AML training that is tailored to their roles in the organization;
  • The compliance program and its staff should be independent, and efforts to manage and mitigate BSA/AML deficiencies and risks should not be compromised by revenue interests so that appropriate investigations of inappropriate activity are undertaken and necessary reports, such as Suspicious Activity Reports, are filed regardless of impact on revenue;
  • Information related to BSA/AML compliance efforts that may be helpful to, and used by, those in the organization combatting fraud, conducting audits or internal investigations, or responding to government subpoenas, for example, is shared throughout an organization, and especially with BSA/AML compliance staff;
  • An institution allocates sufficient human and technological resources to compliance functions;
  • The effectiveness of compliance programs is tested and monitored by independent and qualified parties that do not have conflicting business interests that may influence the outcome of the compliance program test;
  • Leadership and staff understand the purpose of BSA reports and their usefulness to law enforcement and safeguarding our national security, such as identifying suspected activity that initiates an internal investigation or expands on existing investigations, promoting international information exchange, identifying relationships and patterns of criminal activity or emerging threats, and the general deterrent effect BSA reports and other filing requirements have on those who may abuse the financial system.

FinCEN’s Advisory echoes previous warnings from its current Director that FinCEN “will employ all of the tools at our disposal and hold accountable those institutions and individuals who recklessly allow our financial institutions to be vulnerable to terrorist financing, money laundering, proliferation finance, and other illicit financial activity.”[1] Indeed, financial institutions should heed this Advisory as a warning shot that FinCEN and other federal regulators will be taking more aggressive and frequent enforcement actions against institutions and their leadership in those situations where weak compliance programs lead to illicit activity.

Financial institutions should waste no time and begin immediate assessments of their BSA/AML compliance programs to ensure they are meeting the standards outlined by FinCEN.

Read the complete FinCEN advisory by clicking here.

[1] Remarks of Jennifer Shasky Calvery, FinCEN Director, SIFMA Anti-Money Laundering and Financial Crimes Conference (Jan. 30, 2014), available at h/html/20140130.html.