Otting, McWilliams: Agencies Moving Toward More Risk-Based AML Approach

The federal banking agencies plan to reintroduce the examination manual for anti-money laundering/Bank Secrecy Act compliance later this year, Comptroller of the Currency Joseph Otting told the Senate Banking Committee yesterday.

The agencies are “looking to move toward a risk-based approach to that process,” Otting said.

FDIC Chairman Jelena McWilliams added that the agencies—which supervise and examine for BSA compliance but do not have rulemaking authority—are working closely with the Financial Crimes Enforcement Network to address changes to the BSA regulatory framework.

"We get comments on these regulations from community banks,” she said. “We hear them complain about how difficult it is to do what they need to do by cutting lawful access, but at the same time our hands are tied because we can’t amend the regulations. By bringing FinCEN to the table, we believe we can come to a better outcome soon.”

Regulators also addressed the Current Expected Credit Loss accounting standard, which Federal Reserve Vice Chairman for Supervision Randal Quarles said is “very much on our radar.” He noted the agencies’ phase-in period for CECL’s effects on regulatory capital. “If we see some of these adverse consequences that have been proposed, we have the tools to be able to address them by adjusting other aspects of the regulatory system to ensure it’s not a burden on the bank,” he added.

During the hearing, regulators also addressed bank consolidation, financial stability and the country’s overall economic performance, among other topics.