To Avoid Expensive Trouble with Regulators, Banks Should Invest in a BSA Officer with Substantial Authority and Staff Support

While it is often said that “you have to spend money to make money,” it is less often said, but equally true, that you have to spend money to avoid spending a whole lot more money later.  For a bank, investing in a strong Bank Secrecy Act (“BSA”) Officer with an ample anti-money laundering (“AML”) compliance staff could help avoid significant expense down the road.

The BSA, 31 U.S.C. § 5311, et seq., requires each bank to designate a BSA compliance officer for its AML compliance program.  But just hiring a BSA officer is not enough.  A BSA officer must have sufficient staff, resources, and institutional clout to make sure that the bank fulfills all of the other requirements of a satisfactory AML program.  Failure to meet any of those requirements could result in significant regulatory scrutiny and expensive remediation efforts.

The Office of the Comptroller of the Currency (“OCC”) recently found fundamental deficiencies in the AML program at three U.S. branches of MUFG Bank, a major Japanese financial institution.  The OCC and the branches entered into a consent order requiring the branches to overhaul several aspects of their AML program, including maintaining “permanent, qualified, and experienced BSA Officer(s) who shall be vested with sufficient stature, time, and resources to fulfill the duties and responsibilities of the position.”  Each of the other areas for improvement listed in the consent order – AML action plan, lines of authority and responsibility, AML risk assessment, due diligence, monitoring and reporting of suspicious activity, and internal AML audit – requires robust AML compliance staffing.  Banks would be wise to hire and maintain a BSA Officer with sufficient staff and authority in the first instance to avoid having to do so later as part of an expensive, regulator-mandated reform.

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