Supervision and Regulation Letters

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SR 22-5:

Joint Statement on the Risk-Based Approach to Assessing Customer Relationships and Conducting Customer Due Diligence

BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C. 20551

DIVISION OF
SUPERVISION AND REGULATION

SR 22-5
July 6, 2022

TO THE OFFICER IN CHARGE OF SUPERVISION AT EACH FEDERAL RESERVE BANK

SUBJECT:

Joint Statement on the Risk-Based Approach to Assessing Customer Relationships and Conducting Customer Due Diligence

Applicability: This guidance applies to banks supervised by the Federal Reserve that are subject to the Bank Secrecy Act.

The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Financial Crimes Enforcement Network, the National Credit Union Administration, and the Office of the Comptroller of the Currency (collectively, the agencies) are issuing a joint statement to remind banks1 of the risk-based approach to assessing customer relationships and conducting customer due diligence.

The agencies recognize that it is important for customers engaged in lawful activities to have access to financial services. Therefore, the agencies are reinforcing a longstanding position that no customer type presents a single level of uniform risk or a particular risk profile related to money laundering, terrorist financing, or other illicit financial activity.

Customer relationships present varying levels of money laundering, terrorist financing, and other illicit financial activity risks. The potential risk to a bank depends on the presence or absence of numerous factors, including facts and circumstances specific to the customer relationship. Not all customers of a particular type automatically represent a uniformly higher risk of money laundering, terrorist financing, or other illicit financial activity.

Banks that operate in compliance with applicable Bank Secrecy Act/Anti-Money Laundering (BSA/AML) legal and regulatory requirements, and effectively manage and mitigate risks related to the unique characteristics of customer relationships, are neither prohibited nor discouraged from providing banking services to customers of any specific class or type.

The statement addresses the agencies' perspective on assessing customer relationships as well as customer due diligence requirements. It applies to all customer types referenced in the Federal Financial Institutions Examination Council (FFIEC) BSA/AML Examination Manual,2 as well as any customer type not specifically addressed in the FFIEC BSA/AML Examination Manual.

Federal Reserve Banks are asked to distribute this letter to the supervised institutions in their districts and to appropriate supervisory staff. In addition, supervised organizations may send questions via the Board's public website.3

signed by
Arthur Lindo
Deputy Director
Division of
Supervision and Regulation

Attachments:
Notes:
  1. Under the Bank Secrecy Act, the term "bank" is defined in 31 CFR 1010.100(d) and includes each agent, agency, branch, or office within the United States of banks, savings associations, credit unions, and foreign banks. Return to text
  2. See https://bsaaml.ffiec.gov/manual. Return to text
  3. See, http://www.federalreserve.gov/apps/contactus/feedback.aspx Return to text
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Last Update: July 06, 2022