The risk assessment in an anti-money laundering/counter financing of terrorism (AML/CFT) proposed rule creates a new regulatory requirement, America’s Credit Unions Director of Federal Compliance said recently on Ballard Spahr’s “Business Better” podcast.
The Financial Crimes Enforcement Network’s proposal would explicitly require financial institutions to establish AML/CFT programs with a mandatory risk assessment process, among other requirements.
Nick St. John, NCCO, NCBSO, summarized the proposal’s impact on the financial services industry and said America’s Credit Unions will file detailed comments by the Oct. 8 comment deadline.
“Until now, the risk assessment was not a regulatory requirement. It was generally viewed as a best practice, NCUA viewed it as an ‘expectation,’ but not a hard and fast regulatory requirement,” he said. “So this is a change for credit unions.”
While the proposal contains guidance on how the assessment should consider products, services, and distribution channels, notable information is missing, according to St. John.
“There is no guidance at all on the process financial institutions should follow when doing a risk assessment,” he said. “In some ways that’s good, because it’s flexibility … but it just doesn’t seem like enough guidance.”
Even examples of what not to do, such as an assessment that would be insufficient, would be helpful, St. John added. He said America’s Credit Unions would ask for more guidance on processes, the risk assessment, examiner expectations, and more in its upcoming comment letter.
The episode also covered “de-risking” strategies, technological innovation, feedback from law enforcement on the utility of BSA filings, and what it means for an AML/CFT program to be “effective.”
