Sep 14, 2020
For years, private banks and other banks that lack a federal functional regulator (e.g., Federal Reserve, OCC, FDIC, NCUA, SEC, CFTC) have been exempted from having anti-money laundering (“AML”) programs under regulations of the U.S. Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”). That exemption is set to be eliminated. In September, FinCEN issued a final rule (the “Final Rule”) that requires, for the first time, minimum standards for AML programs for banks lacking a federal functional regulator. The Final Rule also extends customer identification and beneficial ownership requirements to such institutions. The compliance deadline for these requirements is March 15, 2021.
Since 2002, FinCEN has subjected most banks to comprehensive AML program requirements pursuant to the Bank Secrecy Act of 1970, as amended by the USA PATRIOT Act of 2001 (collectively, the “BSA”). However, private banks and other financial institutions that are not subject to regulation by a federal functional regulator (such as non-federally insured credit unions and certain trust companies) have not been subject to these requirements. Although they have been subject to other BSA requirements, including the filing of currency transaction reports and suspicious activity reports, which necessarily require them to establish processes to detect unusual activity, FinCEN has recognized that “the gap in AML coverage between banks with and without a Federal functional regulator presented a vulnerability to the U.S. financial system that could be exploited by bad actors.”
New Compliance Requirements and Deadline
The Final Rule updates FinCEN’s regulations in three areas: (i) AML program requirements, (ii) CIP requirements, and (iii) beneficial ownership requirements:
According to FinCEN, banks lacking a federal functional regulator will be able to leverage existing policies, procedures, and internal controls required by other statutory and regulatory requirements to fulfill the obligations set out in the Final Rule. FinCEN estimates that 297 state-chartered non-depository trust companies, 228 non-federally insured credit unions, 29 international banking entities, 12 non-federally insured state-chartered banks and savings and loan or building and loan associations, and one private bank will be required to implement written AML programs as a result of this Final Rule by March 15, 2021.
 See 85 Fed. Reg. 57129 (Sept. 15, 2020) (“Final Rule”), available here.
 Final Rule at 57131.