Searching for Standards: "...lack of clarity...", "...no standard appears to exist..." No Kidding!

The frustrations that are experienced on the front line of our industry are being shared. The associations that represent the financial institutions in our country have been calling, writing letters, writing articles - doing everything they can to get through to the regulators and government agencies to address some of the problems facing you on the front line. From the sounds of the latest correspondence and communications, they're getting nowhere with the regulators and the agencies.

Take, for instance, the worst of the problems - that would be Bank Secrecy Act and Anti Money Laundering regulations, and the accompanying Suspicious Activity Reporting requirements. The combined banking associations in their letter (to FED, FDIC, OCC, OTS, FinCEN and the Secretary of the Treasury, John Snow), goes so far as to say the "...industry's efforts are being complicated, and in some cases undermined, by a * lack of clarity in regulatory examination and enforcement." It goes on to say that * "...no standard appears to exist for a proper Anti-Money Laundering Compliance program." What we hear from the regulatory leadership in Washington is often at odds with the information banks receive from field examiners."

No kidding! We heard Bill Fox, Director of FinCEN at a conference in DC in October talk about 'defensive filing' of SARs. That's filing a SAR even when facts do not warrant filing, because the compliance officer knows if they don't file, the examiner will write them up for it. He said that was wrong. It seems, then, that the top guns in Washington know the score, but the examiners coming through your doors are not getting the message.

ICBA in one of their newsletters to bankers talked about the guidelines put out by OCC. They commented, "Although the decision to file a SAR is often subjective, examiners will cite the bank for failure to file if the failure is "...accompanied by evidence of bad faith, represents a significant or egregious situation, involves a pattern or practice, or otherwise evidences a systemic breakdown." Final decision on that rests with the examiner. And that "...even when BSA deficiencies are not severe enough to be cited, supervisors will still notify the bank and require corrective action." Every compliance officer reading this knows that report goes to the Board of Directors, where all hell breaks loose if there is criticism by the examiners on BSA.

There is not a quick fix possible for this situation. Indeed, from where we sit, we see matters becoming even worse before they start to get better. The problems being thrown at the Compliance/Security Officer from the Fact Act, Check 21, CRA, BSA, etc., mean more stress than ever in trying to maintain compliance.

It's going to be a tough year.

*(Emphasis is the Editor's)

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 1, 2/05