In his remarks during last week’s launch of Case Western Reserve School of Law’s Financial Integrity Institute, FDIC Chairman Martin J. Gruenberg spoke on the historical context of today’s BSA/AML regulatory framework and the FDIC’s role in promoting and maintaining financial integrity. The Financial Integrity Institute describes its mission as seeking “to advance financial integrity globally by conducting and promoting at the highest standards research, education and professional excellence in anti-money laundering, anti-corruption, targeted sanctions and countering the financing of terrorism and international tax evasion policies and practices.”
Chairman Gruenberg recounted the legislative history of money laundering and terrorist financing laws and reminded us that the BSA was originally developed to address the lack of data needed by law enforcement to prosecute financial crimes. The regulatory framework has evolved over time in response to continual technological advancements and the increasing volume and sophistication of financial crime being perpetrated. “[W]hat began as currency transaction reporting requirements to identify citizens evading tax payments,” he said, “has evolved into required BSA/AML compliance programs, suspicious activity monitoring, and new reporting requirements to identify money laundering and terrorist financing, among other financial crimes.” The Chairman also observed that anti-money laundering efforts continue to take on an increasingly international aspect, and that evolving technologies constitute a “double-edged sword” because they can represent new means to either commit, or detect and prevent, financial crime.
In his speech, the Chairman also touched on the FDIC’s supervisory program. He stated that the FDIC evaluates not only an institution’s compliance with the BSA but also whether an institution has established a “culture of compliance.” He further remarked that the BSA/AML compliance program failures seen by the FDIC “often reflect a failure on the part of an institution’s directors or senior management to establish a tone of compliance that permeates the institution.”
We previously have blogged about the regulatory focus on the importance of cultivating a culture of robust BSA/AML compliance within financial institutions. Chairman Gruenberg’s remarks suggest that this focus is not likely to diminish in the near future. As such, it is prudent for financial institutions to keep efforts to develop a culture of compliance top of mind. In particular, the Chairman noted that the FDIC looks for whether directors demonstrate strong corporate governance and have a general understanding of the BSA/AML regulations and the risks posed to their institution, and whether senior management and employees understand the importance of BSA/AML compliance.