The Clearing House and the Bank Policy Institute filed a letter supporting the Financial Crimes Enforcement Network’s (FinCEN) proposed changes to modernize the regulations implementing the Bank Secrecy Act which aims to prevent illicit finance. The Associations generally praise the proposal’s shift away from a “check-the-box” compliance model for anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements toward a risk-based framework that allows banks to focus resources on higher-risk customers and activities. However, the Associations note that many of the proposal’s most important principles appear only in the preamble and should be incorporated directly into the regulatory text. They recommend that regulators explicitly recognize banks’ discretion in designing risk-based programs, discourage examiners from second-guessing reasonable decisions, and clarify key concepts such as “reasonably designed” and “effective” programs.

The Associations also urge FinCEN to promote innovation and improve supervisory consistency by creating a formal framework that encourages the responsible use of technologies such as artificial intelligence, machine learning, digital identity tools, and blockchain analytics without exposing banks to additional supervisory risk. They further support FinCEN’s proposed consultation role in significant AML/CFT supervisory actions but call for greater transparency, opportunities for banks to explain their risk-based decisions, and safeguards against duplicative enforcement actions. Finally, they argue that broader modernization of the Bank Secrecy Act framework remains necessary, including reforms to Suspicious Activity Report, Currency Transaction Report requirements, and reporting thresholds, so that compliance resources can be directed toward activities that provide the greatest value to law enforcement and national security objectives. To read the full letter click here.