By John M. Pachkowski, J.D.
The Clearing House, a banking association and payments company that is owned by the largest commercial banks, has commented on a December 2015 proposal that would require banking institutions supervised by the New York Department of Financial Services to maintain transaction monitoring and watch list filtering programs (collectively, transaction monitoring and filtering programs) as part of their Bank Secrecy Act/Anti-Money Laundering compliance programs. In addition to the transaction monitoring and watch filtering programs, a senior officer of each banking institution would be required to certify that the institution’s monitoring and filtering programs are sufficient to “detect, weed out, and prevent illicit transactions.”
Shortcomings addressed. The proposal was the end result of a series of investigations conducted by NYDFS into terrorist financing, sanctions violations, and anti-money laundering compliance at financial institutions. The proposal noted that “the Department has become aware of the shortcomings in the transaction monitoring and filtering programs of these institutions and that a lack of robust governance, oversight, and accountability at senior levels of these institutions has contributed to these shortcomings.”
Potentially problematic requirements. Although TCH noted in its comment letter, that it was “deeply committed to the shared public and private sector objective of detecting and combating financial crimes and terrorist financing,” it was concerned “that certain elements of the proposal would introduce unnecessarily prescriptive and potentially problematic requirements.”
Specifically, TCH contended that: the proposal was redundant and, in some cases, inconsistent with the existing federal BSA/AML/OFAC framework; and the proposed certification requirement would likely undermine institutional compliance programs and recommends its removal from the proposal.
The trade association suggested that as an alternative to adoption of the proposal, NYDFS establish a public/private sector task force to discuss emerging issues and supervisory expectations for transaction monitoring and filtering programs as each evolves. Additionally, TCH provided technical recommendations on certain aspects of the proposal’s monitoring provisions.
For more information about Bank Secrecy Act/Anti-Money Laundering compliance, subscribe to the Banking and Finance Law Daily.
