WASHINGTON — Today, Deputy Secretary of the Treasury Michael Faulkender spoke at the 62nd Bank Secrecy Act Advisory Group (BSAAG)plenary meeting organized by the Financial Crimes Enforcement Network (FinCEN). At this public-private partnership event, Deputy Secretary Faulkender discussed the Trump Administration’s guiding principles for Bank Secrecy Act (BSA) modernization.
Key Excerpts of Remarks as Prepared for Delivery
I want to clearly articulate the guiding principles that Treasury will continue to use to inform the Trump Administration’s regulatory agenda and its BSA modernization efforts.
First, regulation should derive from a clear statutory mandate, including safety and soundness, mitigating material risk to financial stability, and consumer protection.
Second, regulation should be efficient, striking an appropriate balance between costs and benefits.
Third, regulation should be fair and objective, and there should be clarity and consistency in the industry across entities and time.
Fourth, regulators themselves should be efficient in mitigating risk and in the use of taxpayers’ hard-earned dollars. There should be transparency in their actions.
Throughout the regulatory reform process, we intend to focus heavily on the second principle: ensuring that we find the optimal fulcrum for balancing the somewhat opposing forces of costs and benefits.
When evaluating the costs and burdens of a given regulatory action, we recognize both the direct and indirect costs, including the potential for unintended consequences and the burdens that it can place on the private sector.
This balancing act requires a careful tailoring of regulatory actions, keying off the risk profiles of the various firms affected and their different business models.
Taking a look at the BSAAG members in this very room, we have representatives from a range of financial institutions—large, midsize, and small, bank and non-bank alike. You may also notice something different this plenary. We’ve changed the membership to double the number of small community banks to reflect the Administration’s commitment of putting Main Street first.
Each institution provides different products and services that may be vulnerable to varying kinds of risks. That is why we are providing more opportunities for our Main Street financial institutions to have a stronger voice on regulatory reform.
A reinvigorated BSA system must recognize these differences in meaningful ways. An approach that we may deem necessary for a large institution with an expansive risk profile may be unnecessarily burdensome for a smaller one with a more limited risk profile.
We recognize that there is an urgent need to modernize the implementation of the AML/CFT regime in the United States so that it is effective, risk-based, and focused on the greatest threats to financial institutions and national security. To that end, I have directed my team to work with financial regulators and other stakeholders to move expeditiously to make progress on our modernization efforts. BSAAG members will be a critical part of this effort, and we value your feedback and input to this process.
As part of our BSA modernization efforts, Treasury is working to change the AML/CFT status quo so that the framework focuses on our national security priorities and highest risk areas and explicitly permits financial institutions to de-prioritize lower risks. In line with the AML Act’s directive, this includes an acknowledgement that financial institutions must be permitted to direct more attention and resources toward higher-risk customers and activities, consistent with an institution’s risk profile, rather than toward lower-risk customers and activities.
As many here know, the Trump Administration strongly supports the AML Act’s core purpose of modernizing the AML/CFT laws to better align the government and private sector response to new and emerging threats. Our vision for a modernized BSA regulatory and supervisory regime is one where financial institutions:
- comply with AML/CFT laws and regulations;
- are examined for the risk-based and reasonably designed nature of their AML/CFT programs and set of internal controls;
- direct more resources to the higher-risk areas to U.S. national security and fewer resources to lower-risk areas; and
- generate highly useful information for law enforcement and national security agencies in priority areas defined by Treasury.
Another area where we need to modernize the BSA regime is reporting, especially the Suspicious Activity Report (SAR) and Currency Transaction Report (CTR). SARs and CTRs provide critical intelligence for our law enforcement partners to protect national security by combatting drug cartels, human traffickers and smugglers, fraudsters, and terrorists.
However, Treasury recognizes the burden this reporting imposes on industry and that it is critical for institutions to be able to direct their compliance resources towards the most significant threats to national security.
On the specific topic of SARs, Treasury is currently exploring ways to streamline SAR reporting, including by improving the form itself, which will be beneficial for law enforcement and national security agencies, as well as financial institution filers.
I am happy to report that Treasury is pursuing similar efforts on CTRs. Treasury recognizes that the CTR filing burden imposed on industry is substantial, and that it is critical for institutions to have the ability to direct their compliance resources towards the most significant threats to national security.
Treasury is also working to ensure we encourage financial institutions to responsibly innovate, including exploring ways to enhance how suspicious activity is identified, investigated, and reported.
I know that FinCEN has already consulted extensively with law enforcement and national security agencies; financial institutions, including BSAAG members; as well as financial regulators, in support of the effort to increase the efficiency of CTR and SAR filings.
We recognize that financial institutions are eager for more feedback on how all this reporting is used, which is critical to ensuring the effectiveness of CTR and SAR reporting and something we hope to provide.
Modernizing the AML/CFT regime not only includes updating rules, streamlining reporting, and improving feedback; it also involves a commitment from the Trump Administration to innovation. I understand that the AML Act required the creation of two specific BSAAG Subcommittees: the Innovation and Technology Subcommittee and the Information Security and Confidentiality Subcommittee. The Administration is committed to promoting responsible financial innovation, including related to the use of digital assets. And I know the BSAAG subcommittees will continue to contribute thoughtful ideas on innovation as well.
Finally, a core feature of the reforms in the AML Act is the important role of public-private partnerships in combating national security threats and financial crime. The BSAAG is, of course, one of Treasury’s premier and long-established public-private partnerships.
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