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AML/CFT AML Training BSA Rules and Regulation

Banking Regulators Release April 2020 BSA/AML Examination Manual Updates

Terri Luttrell, CAMS-Audit, CFCS
April 27, 2020
Read Time: 0 min

Key Takeaways

  1. The FFIEC updated four sections of the 2014 BSA/AML Examination Manual.
  2. The updates are not revisions nor do they include changes to current regulatory expectations.
  3. Your BSA/AML examination should be based on risk as justified in your enterprise-wide risk assessment. 

BSA/AML professionals have been anxiously waiting revisions to the 2014 BSA/AML Examination Manual (Exam Manual) published by the Federal Financial Institutions Examination Council (FFIEC), the interagency body comprised of federal banking regulatory agencies. On April 15, 2020, the FFIEC released an interagency statement announcing updates to four sections of the Exam Manual.  According to the FFIEC, these are the first of several phases of updates that will be released. In the statement, the agencies addressed the uncertainty faced by financial institutions during this unprecedented time. 

The Exam Manual was originally intended to provide instructions to examiners when assessing the adequacy of a financial institution’s BSA/AML compliance program when it was first published in 2005. It is also widely used among industry professionals as expected guidance for establishing a sound BSA/AML program even though not all content is regulatory authority.

The April 2020 updates are just updates, not revisions

The April 2020 updates are just that, updates. There are no revisions and the release does not include changes to current regulatory expectations. The purpose of the updates is to provide further transparency and emphasizes a risk-focused approach in examining BSA/AML programs, a clarification that was recently published in a July 2019 regulatory agency joint statement.

Financial institutions have struggled with some examiners losing site of a risk-focused approach during exams, expecting the same level of mitigation within most institutions of differing risk profiles. BSA program management is not a “one size fits all”. Each institution has unique customers, geographies, product and service offerings, and tolerance for risk as indicated by their enterprise-wide risk assessment.

Updates made in the April 2020 release

With these updates the FFIEC made revisions that would clearly distinguish between mandatory regulatory requirements, supervisory expectations and guidance. The four sections with updates are:

  • Risk-Focused BSA/AML Supervision – Provides examiner instruction for risk-focused exams, testing, and analytical reviews
  • Assessing the BSA/AML Compliance Program – Established minimum procedures for assessing the adequacy of a BSA/AML Program
  • BSA/AML Risk Assessment – Provides examiner instructions for assessing the adequacy of an institution’s risk assessment, to include products, services, customers, and geographic locations (this requirement is not new). This section stresses there is no particular method or format to be used by the financial institution, and there is no specific requirement to update a risk assessment on a specified periodic basis, but rather the assessment must align with the current risk of the institution
  • Developing Conclusions and Finalizing the Exam – Reminds examiners that financial institutions have the flexibility in the design of their BSA/AML compliance programs, and minor deficiencies or violations alone are not indicative of an inadequate program

Each of the above sections will be notated with April 2020 within the Exam Manual table of contents. The online version of the Exam Manual is being updated as of this writing.

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April 2020 release remains consistent with past guidance

As stated above, no regulatory requirements or guidance has changed with these updates. The revisions were designed to give greater transparency and to clarify within the Exam Manual that examiners should use a risk-focused approach to BSA/AML program examinations. The updates, however, did not remove the subjectivity of the term “risk-focused” approach.

Tactical applications of the updates

Any change to the BSA/AML process is yet to be determined. Some examiners have always used a risk-focused approach, and for those institutions change will unlikely be noticed. It will be up to each institution’s compliance officer to ensure that your next BSA/AML examination is based on risk as justified in your enterprise-wide risk assessment. It is critical that the risk assessment be thorough and comprehensive, drilling down into all areas of specified heightened risk. Retain all documentation used in developing your risk assessment, including all reasoning in elevating, or decreasing a particular risk category. If you find yourself is a discussion of whether an exam seems risk-focused, let your documented data speak and take much of the subjectivity away.

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About the Author

Terri Luttrell, CAMS-Audit, CFCS

Compliance and Engagement Director
Terri Luttrell is a seasoned AML professional and former director and AML/OFAC officer with over 20 years in the banking industry, working both in medium and large community and commercial banks ranging from $2 billion to $330 billion in asset size.

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About Abrigo

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