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Federal Regulators Urge Banks to Use Innovative Tech Tools to Improve Bank Secrecy Act and Anti-Money Laundering Compliance Efforts

On December 3, 2018, a group of U.S. banking regulators issued a joint statement encouraging banks to use innovative approaches to enhance their Bank Secrecy Act and anti-money laundering (BSA/AML) compliance efforts. The statement came from the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network (FinCEN), the National Credit Union Administration, and the Office of the Comptroller of the Currency.

The regulatory agencies identified several potential avenues for banks to consider, including artificial intelligence, innovative internal financial intelligence units, and digital identity technologies. These technologies should be aimed at improving banks’ abilities to identify and report money laundering, terrorist financing, and other illicit financial activity.

Although banks must continue to meet their current BSA/AML compliance obligations, the joint statement does not create any new obligations. Banks are not required to pursue such innovative technologies. But, if they do, the statement provides that pilot programs for developing new technologies will not subject banks to supervisory criticism or additional regulatory expectations. And, pilot programs that identify gaps in a compliance program will not necessarily result in supervisory action. Instead, the agencies will evaluate the banks’ existing compliance program independent of the pilot program. The agencies’ statement does not provide a formal safe harbor, but does give some regulatory comfort that should encourage banks to try new approaches to compliance.

As banks launch pilot programs and evaluate new technologies, they should consult with the agencies to promote their understanding of the technologies and to clarify expectations for compliance. Banks should also take into account information security, third-party risk management, and compliance with other regulations, among other factors, as they utilize developing technologies. Even if banks decide not to pursue innovative approaches, they should continue to diligently review and update their existing BSA/AML compliance programs.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.