OCC Compliance Risk Assessment: BSA/AML Concerns Threaten Safety of the Banking Industry


The U.S. Office of the Comptroller of the Currency (OCC) compliance risk assessment states that concerns related to BSA/AML remain high and pose a threat to the safety and soundness of the federal banking system.


“Complex, dynamic money laundering, terrorist financing, and other criminal activities challenge banks in complying with BSA/AML requirements,” says a report issued recently by the OCC’s National Risk Committee. “Bank management should periodically reassess and, when necessary, adjust BSA/AML compliance risk management systems commensurate with the risk associated with their products, services, customers, and geographic footprint,” the committee says in its semiannual risk report.


While overall trends have been positive, the BSA/AML-related deficiencies identified by the OCC stem from inadequate customer due diligence and enhanced due diligence, insufficient customer risk identification, and ineffective processes related to suspicious activity monitoring and reporting.


OCC Compliance Risk Assessments


Improvements in banks’ BSA/AML risk management systems identified

The OCC has identified improvements in banks’ BSA/AML risk management systems, including risk assessments, policies and procedures, and associated controls. The identified improvements are generally in line with changes in risk profiles, the introduction of new products and services, substantial changes in customer volume or types, and significant increases in transaction volume.


The OCC is concerned that smaller regional and community banks may have trouble hiring and keeping staff to manage BSA/AML compliance programs.


The report said the agency expects banks to monitor changes to regulatory requirements and to implement changes, when necessary, to comply with those requirements. They expressed concern about FinCEN’s final rule on Customer Due Diligence and whether banks would be able to update their training, testing, and controls during the 2019 fiscal year.


Trade Sanctions Programs

The OCC also reviews bank systems for managing risks related to complying with U.S. economic and trade sanctions programs under the Office of Foreign Assets Control (OFAC). The complexity of the requirements poses challenges for some banks.


“It is important for banks to maintain effective policies and procedures for screening against OFAC’s Specially Designated Nationals and Blocked Persons List and other sanctions lists,” OCC stated.


The OCC compliance risk assessment went on to warn that the face of crime is changing. “Illicit transaction activity is no longer just associated with traditional financial products and services. Virtual currency and crypto assets present novel vulnerabilities that criminals can exploit.”


The report also pointed to the rapid growth of FinTechs as areas to watch as developments and the popularity of mobile technology applications offer banks access to new payment delivery channels and customers.


“These technologies promote the development of new products and services but may also increase risk exposure,” said the report.


The report covers risks facing national banks and federal savings associations based on data as of December 31, 2018. It focuses on issues that pose threats to those financial institutions regulated by the OCC and is intended as a resource to the industry, examiners, and the public.


Alessa is an anti-money laundering software that gives companies the ability to monitor all of these issues by integrating with their current financial management systems. To learn more about how Alessa can help with AML and OCC compliance, contact us today.

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