Strengthening Compliance: A Narrative on Addressing BSA/AML Deficiencies

When financial institutions face regulatory scrutiny, a structured and proactive approach is essential for restoring compliance and ensuring operational integrity. In a recent case, a bank under regulatory order was tasked with revising its BSA/AML (Bank Secrecy Act/Anti-Money Laundering) program to address significant deficiencies. Here’s how the process unfolded and the measures taken to achieve compliance.

Recognizing the Need for Change

The journey began when the Examiner-in-Charge (EIC) identified key deficiencies in the bank’s BSA/AML practices. These issues were critical, touching on compliance matters that jeopardized adherence to Articles V through XVI of the regulatory order. The EIC required the bank to revise its BSA/AML Action Plan to address these concerns. Understanding the gravity of the situation, the bank’s leadership took immediate steps to draft a revised Action Plan. This revised plan had to not only address the existing gaps but also secure the EIC’s written determination of no supervisory objection before implementation.

Crafting a Plan for Compliance

With the revised Action Plan in hand, the Board of Directors assumed the responsibility of overseeing its adoption and implementation. This wasn’t a one-time task but an ongoing commitment to ensure that bank management adhered to the updated plan and timelines. To monitor progress, the bank established a robust reporting framework. Within 120 days of receiving approval for the revised plan, and subsequently every quarter, the bank prepared detailed progress reports for the Board. These reports outlined the corrective actions taken, the results achieved, and the remaining steps to achieve full compliance.

Engaging an Independent Consultant

Recognizing the need for an unbiased perspective, the bank proposed engaging an independent, third-party consultant to conduct an end-to-end review of its BSA/AML program. This wasn’t a decision taken lightly. The proposed consultant’s qualifications, engagement terms, and the scope of their work were meticulously reviewed and approved by the EIC.? The consultant’s mandate was clear: assess every aspect of the bank’s BSA/AML program, identify gaps and deficiencies, and ensure the program aligned with the bank’s risk profile. The results of this assessment would form the cornerstone of the bank’s remediation efforts.

The Consultant’s Findings

Within 30 days of completing their assessment, the consultant presented their findings to the Board. Their report was thorough, highlighting weaknesses in the program and providing recommendations for improvement. The Board reviewed the report, documented their discussions, and shared both the findings and their meeting minutes with the EIC.? In addition to the report, the consultant provided the EIC with supporting materials and work papers, ensuring complete transparency throughout the process.

Implementing Change

Armed with the consultant’s insights, the bank integrated a remediation plan into its broader Action Plan. This included addressing specific deficiencies, assigning responsibilities to key individuals, and setting clear timelines for completion.

The Board maintained oversight, ensuring that management adhered to the revised plan and that progress was monitored continuously.

A Commitment to Compliance

This case highlights the importance of structured oversight and collaboration in addressing regulatory concerns. From revising the Action Plan to engaging an independent consultant, every step reflected the bank’s commitment to strengthening its BSA/AML program and aligning with regulatory expectations. Compliance is not a one-time achievement but a continuous effort. Through proactive measures, clear accountability, and ongoing monitoring, the bank demonstrated its dedication to maintaining the integrity of its operations and ensuring adherence to U.S. laws and regulations.