U.S. Rep. French Hill (R-AR), chairman of the U.S. House Financial Services Committee, urged the Financial Crimes Enforcement Network (FinCEN) to adopt a final rule that fully empowers financial institutions to adopt AI throughout their Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) programs.
“As money launderers and scammers adopt the latest tools of digitized finance, it is imperative that financial institutions are empowered to respond,” wrote Rep. Hill and a Republican colleague, U.S. Rep. Warren Davidson (R-OH), in a June 9 letter sent to FinCEN Director Andrea Gacki.
In the letter, Rep. Hill and his colleague urged FinCEN to finalize its AML/CFT rule to reduce unnecessary compliance burdens, raise outdated reporting thresholds, encourage AI-driven risk monitoring, and refocus the Bank Secrecy Act on producing actionable intelligence for law enforcement.
Specifically, FinCEN’s notice of proposed rulemaking (NPRM) is a critical opportunity to prioritize risk in Bank Secrecy Act (BSA) implementation, wrote the lawmakers.
“As you know, compliance is a regulatory burden for financial institutions that has grown untethered from AML/CFT outcomes, even as it imposes an estimated $59 billion in costs annually across the sector,” they wrote. “Furthermore, antiquated filing thresholds and the manner in which the BSA is currently enforced drive compliance resources into the production of tens of millions of low-value filings.
“The NPRM aims to shift this focus, empowering financial institutions to evaluate risk and provide actionable intelligence rather than defensive reporting,” they added.
The members requested FinCEN take into account several considerations as it develops the final rule, including to adhere to the AntiMoney Laundering Act of 2020 (AMLA), which requires a shift away from the current BSA enforcement paradigm that emphasizes process over outcomes in both form and practice.
“By taking enforcement actions for failures that are irrelevant or low-value to law enforcement, and by regularly using enforcement powers to penalize them, supervisory agencies drive compliance resources into liability mitigation rather than the identification of AML/CFT risk, they wrote.
Rep. Hill and his colleague also think that FinCEN should streamline and tailor requirements around BSA filings, and better clarify what Suspicious Activity Reports it does not need in order to assist financial institutions in better designing their AML/CFT programs.
“AI promises to revolutionize financial institutions’ ability to identify risk and streamline reporting,” wrote the members. “Yet, all too often regulators have inhibited adoption, either requiring parallel processes that undermine its commercial rationale or otherwise discouraging its use.”