Academic journal article ABA Banking Journal

BSA Exam Procedures Bring Uniformity ... but at a Price; Some Fear Flexibility, Sacrificed on the Altars of Uniformity and Certainty, Will Be Missed, but Crave More Guidance in Some Areas. Even with Mixed Reviews, the 300-Page Tome Is the New S.O.P for Bank Secrecy Act Compliance

Academic journal article ABA Banking Journal

BSA Exam Procedures Bring Uniformity ... but at a Price; Some Fear Flexibility, Sacrificed on the Altars of Uniformity and Certainty, Will Be Missed, but Crave More Guidance in Some Areas. Even with Mixed Reviews, the 300-Page Tome Is the New S.O.P for Bank Secrecy Act Compliance

Article excerpt

To say that the interagency anti-money-laundering and Bank Secrecy Act examination procedures published this summer were long-awaited is putting it mildly. For months beforehand, whenever questions about how to handle this or that aspect of this heavy BSA compliance challenge came up, the answer inevitably included a reminder along the lines of "the upcoming interagency exam guidelines will clear a lot of this up."

And finally they arrived. On June 30, the regulators delivered the exam procedures, as promised, and said they would begin using them in earnest in the third quarter. Over the remainder of the summer, they ran an extensive outreach program to educate bankers about the procedures, incorporating both webinars and live meetings around the country. The sessions typically included presentations by regulators as well as segments on performing BSA risk assessments, presented by bankers.

In recent compliance history, the handing down of the procedures--300-plus pages, as published--stood out. The compliance fraternity consists, of course, of paper junkies, but many other portions of the industry also wanted to see what the united regulators had wrought. Calls for consistency in BSA examination policy and procedures, and more clarification of banks' AML/BSA duties, had come not only from the trenches, but also from the executive suite. Top management saw too much time and expense given over to regulatory uncertainty, and too many threats coming from examiners who they felt were reading from their own, sometimes possibly impromptu, rulebooks.

Thus, when the procedures were unveiled, ABA was rather upbeat. "This long-awaited guidance could not have come too soon," the association stated. "While ABA will continue to monitor the experiences of our members under these new procedures, we are optimistic that our [banks' and the regulators'] joint efforts will be successful."

In the outreach sessions they sponsored, representatives of the regulatory agencies often spoke about the new interagency procedures as if they didn't quite believe that they could have found so much common ground with their fellow bureaucrats. On the other hand, more than one banker among those we interviewed complained that the regulators should have spent less time patting each other on the back, and more time answering bankers' questions.

Strong beginning, but still a beginning

Plenty of questions are out there, based on talks with bankers and compliance consultants, ranging from "Do you really expect a smaller bank to be able to screen for politically exposed persons the way a megabank can without providing software?" to "What do you want our risk assessment document to look like?"

It is fair to say that the procedures, in their length, depth, scope, and structure, far exceeded what many bankers were expecting.

"A lot of people saw this as a new set of commandments," says Charles Grice, director, anti-money laundering and financial services, Kroll Inc., risk control consultants.

"However," continues Grice, "they expected ten commandments. Instead, they got 300. This is heaven to consultants and advisors, and if you are a compliance officer, you now have 300-plus pages of additional job description."

Nevertheless, the publication of the exam procedures has not only leveled the playing field for banks regulated by different agencies, but also restored some balance to the examiner bank relationship. Compliance consultant Lucy Griffin believes that the procedures, while admittedly lengthy and detailed, "can be a tool for managing an examiner who is out of line."

Many little holes in the BSA canon have been filled in by the procedures, experienced observers say. For instance, it has become much clearer what kind of training a bank is expected to provide in these matters and to whom it is expected to provide it, according to consultant Nancy Castiglione, D. …

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