Financial institutions long have complained that current anti-money laundering (AML) regulations are costly and ill-suited to prevent crime and terrorism. According to one study, the cost of compliance with AML rules approaches $8 billion. The rise in compliance costs has coincided with a sharp increase in both the number and amount of penalties assessed by the Financial Crimes Enforcement Network (FinCEN).
In an effort to ease these burdens, the largest U.S. banks have begun a push to amend existing AML regulations. On February 16, 2017, The Clearing House, a financial institution trade association, issued a new report entitled “A New Paradigm: Redesigning the U.S. AML/CFT Framework to Protect National Security and Aid Law Enforcement.” The recommendations in the report include:
- A more centralized and coordinated approach from government regulators, with FinCEN playing a more significant role;
- More specific guidance on enforcement priorities and the type of activity sufficient to trigger a Suspicious Activity Report (SAR), and an increased SAR dollar threshold;
- Legislation requiring companies to report beneficial ownership information at the time of incorporation and clarifying and expanding the scope of information sharing permitted between financial institutions.
This is not the first time that financial institutions have advocated for AML reforms. Previous iterations have included efforts to reduce limitations on sharing SARs with foreign affiliates and pushback against FinCEN proposals on customer due diligence and beneficial ownership rules. But, in light of the Trump administration’s apparent desire to roll back regulations on businesses, and on banks in particular, this effort may yield more fruit than previous iterations.