On October 3, 2018, the main federal regulators, along with FinCEN, released a statement regarding instances in which banks and credit unions may decide to enter into collaborative arrangements to share resources to manage their Bank Secrecy Act (BSA) and anti-money laundering (AML) obligations more efficiently and effectively. While this guidance may not be beneficial for a majority of financial institutions, this may be beneficial for very small institutions with a low-risk profile and less-complex structures, or those institutions who are owned by the same organization.
The federal regulators have described collaborative arrangements as involving two or more financial institutions with the objective of participating in a common activity or pooling resources to achieve a common goal. Examples of other collaborative arrangements in banking include pooling human, technology, or other resources with a goal of saving money and increased efficiencies through the sharing of resources.
In their statement, the federal agencies have described a number of examples where a collaborative arrangement may be beneficial for a financial institution, including:
Internal Controls. In this arrangement, resources would be shared to conduct internal control functions including:
Reviewing, updating, and drafting BSA/AML policies and procedures;
Reviewing and developing risk-based customer identification and account monitoring processes; and
Tailoring monitoring systems and reports for the risks posed.
Independent Testing. Independent testing through a collaborative arrangement could allow for a qualified and independent employee from one bank to conduct the testing for another bank. When utilized, appropriate safeguards must be established to ensure privacy.
BSA/AML Training. As qualified BSA professionals may be difficult to find in some communities, training can be quite costly for some organizations. Therefore, a collaborative arrangement could provide multiple banks the latitude to hire a qualified instructor to conduct BSA/AML training, allowing the institutions to share the cost.
In addition to these examples, the guidance goes on to state that it may not be appropriate for financial institutions to enter into a collaborative arrangement to share a BSA Officer, though the guidance doesn’t specifically prohibit it.
The guidance concludes with a section on considerations and mitigations that should be considered when entering into collaborative arrangements. In addition to other considerations, the agencies explain that a collaborative arrangement should be supported by a contractual agreement between the parties, with performance monitored and regularly evaluated by management.
The OCC version of the statement can be found here.
The FDIC version of the statement can be found here.