Designating an AML/BSA Officer: The Second Pillar

Knowing that there’s one individual with daily responsibility for an AML/BSA program— and recognizing that the buck truly stops with this person— is an indispensable ingredient in a strong compliance program. No wonder designating an AML/BSA officer is considered the second of five internationally recognized pillars of Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) compliance.

Last week we covered the importance of developing internal policies, procedures, and controls, the first of the five compliance pillars (you can find that post here). In future blog posts we’ll cover the final three compliance pillars.

Designating an AML/BSA officer is so important that financial institutions with weaknesses have and will continue to be cited by regulators. What examiners want to see is an AML/BSA officer who has the experience to manage a program successfully and is not stretched to the point where problems might potentially go undetected.

Finding an AML/BSA Officer

FinCEN has repeatedly emphasized that each institution’s board and senior management are ultimately responsible for BSA and AML compliance. Given that responsibility, directors and senior management should be involved in the designation process. A financial institution’s board of directors approves the designated AML/BSA officer, and the designation should be recorded in the meeting minutes.

Reporting structure at your institution should limit even the potential for the appearance of conflicts of interest. Direct reporting to the board and top management gives an AML/BSA officer the necessary independence to make and report impartial decisions. Financial institutions should strive to reduce any conflicts of interest that might compromise the BSA/AML officer’s ability to perform their job.

Initial qualifications, however robust, do not preclude a BSA officer from remaining up to date. An AML/BSA officer should engage in regular educational programs, with annual BSA/AML compliance training as an industry starting point.

Getting Creative

There’s no one-size-fits-all answer to compliance hiring. For smaller financial institutions, an officer might oversee the AML/BSA program as just one of several duties. If the program is not particularly large or complicated, having a compliance officer that wears a few different hats might work. However, it’s important to remember that examiners will look closely to ensure that the necessary time and effort is being devoted to managing and maintaining the BSA program.

Naturally, small banks or credit unions often find it more difficult to offer the competitive salaries necessary to attract an AML/BSA officer with all desired credentials. To solve this dilemma, some have started thinking outside the box.

One solution is to hire an AML/BSA contractor. The downside here is that it’s not as easy to investigate the background and credentials of contractors and yet this individual is being entrusted to a very important function.

Another solution is to use an AML/BSA staffing firm to identify contractors. The crux of the matter here is how well the staffing firm knows its contractors. Some firms employ contractors (typically the most promising scenario) while others are merely sending clients resumes of individuals who may or may not have been thoroughly vetted. When using a staffing firm, one important question is whether the firm itself is performing background checks or whether it is trusting a third party to vet candidates.[1]

Two or more financial institutions can share an AML/BSA officer, but not without challenges. While cost effective,regulators have voiced some concerns about the practice. In an interagency statement, banking regulators said that sharing a BSA officer “could be challenging due to the confidential nature of suspicious activity reports filed and the ability of the BSA officer to effectively coordinate and monitor each bank’s day-to-day BSA/AML compliance. In addition, the sharing of a BSA officer may create challenges with effective communication between the BSA officer and each bank’s board of directors and senior management.”[2]

In the end, designating someone to serve in the critical role of AML/BSA officer is no simple feat. Taking the time and devoting the resources to choosing an officer wisely can prevent enormous problems down the road.

[1]BSA Officers: How to Mitigate Risks When Hiring a Staffing Firm [2]Interagency Statement on Sharing Bank Secrecy Act Resources | FinCEN.gov