Board of Governors of the Federal Reserve System

Banks play a vital role in combatting money laundering and the financing of terrorism through their Bank Secrecy Act function and responsibility. The proposal we are considering today reflects changes made by the Anti-Money Laundering Act of 2020 and regulations issued by Treasury's Financial Crime Enforcement Network (FinCEN). Although the Board is not required to amend its regulations, it has elected to do so to mirror those being issued by FinCEN. While I support efforts to reduce duplicative regulations and the burden that would be associated with our regulated institutions being required to comply with multiple overlapping requirements, I would have preferred that compliance expectations for this new rule be expressly tailored to the size, business model, complexity, and risks presented by institutions, particularly for community banks, and those with assets below $10 billion. Therefore, I am not able to support the proposal in its current form.

Tailoring our regulations recognizes that there are trade-offs between the costs and benefits of our regulatory actions and the unintended consequences. Today's proposal would impose a number of new burdens on our smallest institutions.

Banks with assets below $10 billion generally present far fewer anti-money laundering and countering the financing of terrorism risks since they are already engaged in relationship banking and know their customers. They also have limited staffing and resources to devote to implementing additional requirements, which include creating of a formal risk assessment that must be updated periodically. I also expect that many of our smallest institutions will face challenges in incorporating an analysis of their suspicious activity report and currency transaction report filings into these assessments, given their resource constraints and lack of law enforcement feedback to enable an analysis of these filings.

Any final rule adopted by the Board would need to be tailored to clarify the expectations for and minimize any additional burden on these smaller, less risky institutions. I strongly encourage the public to submit comments on the proposal.