EXCLUSIVE: Updated U.S. Anti-Money Laundering Examination Manual Expected in Mid-2019

Topics: Financial Crime, Financial Fraud & Anti-Money Laundering, Fraud, Government, Government Regulation, Terrorist Financing, Thomson Reuters, Thomson Reuters Regulatory Intelligence


HOLLYWOOD, Fla. — A long-awaited update to the U.S. anti-money laundering (AML) regulatory examination manual is expected in the coming months, according to Joseph Otting, head of the Office of the Comptroller of the Currency.

“We’ve got the pedal to the metal,” Otting told Thomson Reuters Regulatory Intelligence, following a keynote address at the 24th Annual International AML & Financial Crime Conference of the Association of Certified Anti-Money Laundering Specialists (ACAMS). “I would have hoped we would have had it out by now, but it’s an interagency, highly complex thing. But I would like to think that before the middle of the year we would definitely have it out.”

The Federal Financial Institutions Examination Council (FFIEC) Bank Secrecy Act/Anti-Money Laundering Manual is the template that examiners with all U.S. federal banking agencies use to supervise for AML compliance. The manual, often referred to as the “AML bible” because of its importance as a compliance guide to financial institutions, was updated in 2010 and again in 2014, and sections on customer due diligence and beneficial ownership were added last year.

The current, more comprehensive overhaul was discussed by regulators during a separate session at the ACAMS conference, although there was no discussion of the timeframe for completion.

Risk-Focused Examinations

The updated manual will more thoroughly address the importance of risk-focused examinations, said Lisa Arquette, a senior regulatory official with the Federal Deposit Insurance Corporation (FDIC). “We’re going to weave that notion throughout the manual,” Arquette said. “We’re going to make sure it’s emphasized over and over and over. Why? Because we think it’s important, not only for our examiners, but because this is a public document, we think that it would help when others are taking a look at the manual, they know that that is the approach.”

Regulatory officials “are really looking at the structure and the messaging so that if there are terms like ‘must,’ they are associated with a regulatory requirement,” Arquette said. “We think for the most part that is how the manual has been written, but we are scrubbing it just to make sure that there is no misperception between a regulatory requirement and what our examiners should do in terms of instruction for examining an institution,” she said.

Many bankers in recent years have been critical of examiners’ approaches to AML supervision, claiming their expectations do not always align with institutions’ legal obligations. Bankers also complain that examiners enforce guidance statements as if they were regulatory requirements and do not permit banks to make their own risk-based compliance decisions.

Regulators are clearly responding to those complaints.

“Musts vs. Shoulds”

A key goal of the updated manual will be to clarify “the musts versus the shoulds,” said Spencer Doak, director for Bank Secrecy Act compliance policy with the Office of the Controller for the Currency. “We want to ensure that if (an AML compliance program element) is a must, it’s grounded in law,” Doak explained. He reiterated the fact that regulators are intent on employing “a risk-focused approach throughout the manual.”

With the release of the updated manual, the FDIC will also be providing “foundational training” to examiners, Arquette said, adding that she hopes all the bank regulators will agree to participate in “road show” events across the country to discuss the updated manual with the private sector. “We’ve got a drafting team working hard to make a lot of edits and start vetting different pieces (of the manual),” she noted. “It’s a big undertaking and I would suggest it’s a bigger update than we’ve previously had in the past.”

Speaking to Regulatory Intelligence after his keynote speech, Otting said he believes the updated manual “will be a big break-through for institutions.”