Comptroller of the Currency Thomas J. Curry said on Tuesday that the Bank Secrecy Act is a crucial element in combating illegal drugs and terrorism, adding that industry and government will need to demonstrate extra diligence in confronting future challenges.
“The BSA and other anti-money laundering requirements have also provided critical support to those on the front lines in the fight against terrorism,” Curry said. “These are all high-stakes issues that have a critical impact upon our families, our communities and our very lives. So, everything that supervisors and regulated institutions alike can do to ensure compliance with the Bank Secrecy Act is time and money well spent.”
Curry pointed to several instances in which a large financial institution was found to have lax BSA controls, saying regulators find “a number of common threads” in review of the failures.
“Information technology is crucial to almost every aspect of a financial institution’s success, and these systems need to evolve as risks grow and change,” Curry said. “However, two of the other root causes for inadequate BSA programs are equally disappointing—corporate governance processes that are too weak to support a culture of compliance and management unwillingness to commit adequate resources to the task. In the banks that we have cited for BSA violations, we very often find insufficient staffing, high turnover rates and cutbacks in spending on compliance.”
Curry said establishing an effective compliance structure is a key responsibility for executive management, adding that senior management needs to ‘”walk the talk’” by ensuring employees are compensated for their diligence.
“All managers—not just the ones who work in compliance—share in the responsibility for BSA/AML compliance, and those who engage in good compliance practices should be rewarded, while those who neglect their compliance responsibilities should not be, regardless of how much they have contributed to the bottom line,” Curry said.
Curry noted a trend among banks in which they distribute BSA/AML compliance accountability across the entire organization, as opposed to designating compliance responsibilities to one unit.
“That’s crucial, because BSA isn’t just a problem for the teller platform or the wire transfer room, it’s a risk that manifests itself throughout the bank,” Curry said. “This is particularly true in the M&A context, where some institutions have inherited significant BSA problems from the acquired institution, so it’s vital that due diligence in an acquisition go beyond credit portfolios to include a look at the target institution’s BSA program.”
Curry said the OCC supports a number of initiatives aimed at improving U.S. banks’ BSA/AML programs, including enhanced information sharing, legislation that encourages institutions to file Suspicious Activity Reports, the widening of the safe harbor for information-sharing institutions and a government-led effort to provide information on money laundering schemes to banks.
“We’ve achieved a great deal in the area of BSA/AML compliance,” Curry said. “But the challenges are growing along with the risks, and it will take all of our efforts – as well as all of the resources we can beg, borrow or buy—to keep up.”