The Federal Financial Institutions Examination Council (FFIEC) is a formal U.S. interagency body established on March 10, 1979 and made up of five banking regulators, including the Federal Reserve Board of Governors (FRB), the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the Consumer Financial Protection Bureau (CFPB).The Council establishes uniform principles, standards, and report forms for the federal examination of financial institutions and promotes consistency in the supervision of financial institutions. Accordingly, the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual (Exam Manual) is a publication of the FFIEC that provides instructions to examiners for assessing the adequacy of a bank’s BSA/AML compliance program.
On April 15, 2020, the FFIEC announced its release of several updates to the Exam Manual, which was originally released in 2005 and last updated in 2014. Significantly, these updates do not establish new requirements for BSA/AML compliance programs, nor do they create changes to current regulatory expectations. However, compliance officers should nonetheless take note of the updated sections as they provide additional transparency into the BSA/AML examination process as well as supervisory expectations.
The recently revised sections of the Exam Manual were updated in collaboration with the Financial Crimes Enforcement Network (FinCEN) and emphasize a risk-based approach to BSA/AML supervision. Additionally, the revisions serve to ensure the distinction between mandatory regulatory requirements and supervisory expectations. The revisions also incorporate regulatory changes since the last update of the Exam Manual in 2014.
As noted in the FFIEC Interagency Statement announcing the release of the April 2020 updates, significant revisions to the Exam Manual focus on the following four main sections:
1. Risk-Focused BSA/AML Supervision – The Manual provides instructions to examiners for tailoring BSA/AML examinations to a bank’s risk profile, including examination and testing procedures, and conducting risk-focused testing or analytical reviews.
2. Assessing the BSA/AML Compliance Program – The Manual provides instructions to examiners for assessing the adequacy of a bank’s BSA/AML compliance program and constitutes a minimum set of procedures for full scope BSA/AML examinations.
3. BSA/AML Risk Assessment – The Manual provides instructions to examiners for assessing the adequacy of a bank’s BSA/AML risk assessment processes and provides instructions to examiners that there is no particular method or format a bank must use for the risk assessment.
4. Developing Conclusions and Finalizing the Exam – The Manual reminds examiners that banks have flexibility in the design of their BSA/AML compliance programs, and minor weaknesses, deficiencies, and technical violations alone are not indicative of an inadequate program.
A PDF version of the FFIEC Interagency Statement can be accessed here.
A PDF version of the April 2020 FFIEC BSA/AML Examination Manual can be accessed here.