The U.S. Government Accountability Office (GAO) is reminding the Federal Deposit Insurance Corporation (FDIC) and the Board of Governors of the Federal Reserve System (Federal Reserve) that it should undertake a review of Bank Secrecy Act/Anti-Money Laundering (BSA/AML) regulations and revise them to address bank derisking.
On April 20, 2020, GAO wrote separately to the Federal Reserve and FDIC with an update on the status of these agencies’ implementation of GAO’s 2019 recommendations, drawing attention to areas that should be given high priority. Among the several priority recommendations yet to be implemented is one on derisking. This recommendation stems from GAO’s 2018 report on derisking along the southwest U.S. border (GAO-18-263). In that report, GAO recommended that these two agencies, along with the Financial Crimes Enforcement Network (FinCEN) and the Office of the Comptroller of the Currency (OCC), jointly conduct “a respective review” of BSA/AML regulations. “This review should focus on how banks’ regulatory concerns may be influencing their willingness to provide services,” the recommendation states. It adds that the agencies should “take steps, as appropriate, to revise the BSA regulations or the way they are being implemented to help ensure that BSA/AML regulatory objectives are being met in the most effective and least burdensome way.”
In 2018, the FDIC and the Federal Reserve convened a working group with the OCC, FinCEN, the National Credit Union Administration and the Office of Terrorism and Financial Intelligence to identify ways to improve the regulations, supervision and examinations. The working group recently updated the BSA/AML Examination Manual, “which may influence banks to derisk,” the letter to the Federal Reserve states. However, to fully implement the GAO recommendation, “the working group needs to consider and evaluate the full range of other supervisory concerns, such as conducting a retrospective review of BSA/AML regulations focusing on how banks’ regulatory concerns may be influencing their willingness to provide services,” the letter states.
GAO will continue to monitor the activities and outcomes of the working group.