BPI’s John Court Testifies on BSA Modernization

Washington, D.C. - John Court, Bank Policy Institute Executive Vice President, General Counsel and Chief Operating Officer, will testify today before the U.S. House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions at a hearing on "Modernizing the BSA for Financial Crime in the 21st Century."

In his testimony, Court identifies reforms that would bolster the U.S. anti-money laundering regime and shift its focus away from technical compliance and towards preventing serious financial crime. Court describes how a comprehensive AML reform law (the 2020 Anti-Money Laundering Act) promised to empower banks to prioritize the most urgent threats; however, more than five years later, no implementing rules have been adopted, deadlines have been missed, and examiners' focus on compliance for compliance's sake has intensified.

"We have a once-in-a-generation opportunity to rationalize this system and refocus tens of thousands of bank employees on identifying serious criminal activity rather than checking boxes. A few key reforms should guide that broader effort," Court said in written testimony.

Recent Efforts. Over the last year, the Administration has endorsed a shift toward an AML framework that focuses on national security priorities, prioritizes higher-risk activity and expressly allows banks to de-prioritize lower-risk areas - all in line with the intent of the Anti-Money Laundering Act. This would enable banks to provide law enforcement with the most useful, meaningful threat information without being hampered by inconsistent supervisory expectations and a focus on rigid, technical compliance processes above all else.

Recommended Reforms. Court highlighted key reforms that would strengthen this shift in AML approaches, such as:

• Expediting AML Program Rule revisions to give banks clear authority to run effective, risk-based programs tailored to their activities and risk profiles, with exam and supervisory expectations aligned to that standard
• Aligning suspicious activity reporting (SAR) requirements with FinCEN's National Priorities, clarify vague filing expectations that encourage over reporting and update the SAR form to let banks identify-on a best-efforts basis-when activity relates to those priorities
• Federal banking agencies taking actual AML risk into account before issuing supervisory actions
• Eliminating the aggregation requirement in the CTR requirement and reviewing outdated CTR thresholds
• Simplifying SAR and CTR forms so they are more standardized and easier to complete
• Explicitly encouraging responsible use of innovation and AI-supported by strong governance-so banks can better detect complex illicit finance patterns while reducing unnecessary friction for law-abiding customers.

Read More. To learn more about AML and Bank Secrecy Act reform, check out these BPI resources.

• FinCEN Should Reassert Its Control Over Anti-Money Laundering Policy
• Time for a Reckoning on AML and Crypto
• BPI Statement on Proposed Bank Secrecy Act Modernization Rule
• BPI and The Clearing House Association Urge Treasury to Modernize AML Rules for the Digital Age

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About Bank Policy Institute

The Bank Policy Institute is a nonpartisan public policy, research and advocacy group that represents universal banks, regional banks and the major foreign banks doing business in the United States. The Institute produces academic research and analysis on regulatory and monetary policy topics, analyzes and comments on proposed regulations, and represents the financial services industry with respect to cybersecurity, fraud, and other information security issues.

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