Regulatory technology, known as regtech, represents another
new change for the industry: this rapidly-evolving technology is
designed to assist institutions with their compliance obligations
by streamlining, updating, and enhancing their monitoring and
reporting capabilities. Regtech is coming, but it will not disrupt
or replace conventional software technologies utilized by banks
to assist them in fulfilling BSA/AML compliance obligations in
the near term. Regtech can leverage technology to better understand and manage risks and ultimately reduce the costs of compliance. Machine learning and other artificial intelligence-based
monitoring tools may provide financial institutions with better
and more efficient solutions for achieving compliance with the
BSA. But regtech will not replace conventional monitoring and
control systems employed by financial institutions in BSA/AML
compliance programs in the immediate future. Instead, regtech
will gain importance over time because it presents an opportunity
for institutions to replace aging technology with newer, more
Financial regulators, including the FBAs, may be slow to accept
regtech until they become comfortable with how the technology
works and its ability to sufficiently meet the objectives of the BSA/
AML regime. At an institutional level, when an institution begins
to move in the direction of incorporating regtech into its BSA/
AML compliance program (to better identify, measure, monitor,
and manage associated risks), examiners will expect an institution
to maintain its current monitoring systems and controls until it
can validate that the newer technology is effective and sustainable. Therefore, although regtech will have a significant impact
on improving BSA/AML compliance as the technology evolves,
the major effects will likely not be felt in the immediate future,
as supervisory acceptance will be measured.
Financial regulators and law enforcement will rigorously con-
tinue to ensure compliance with the BSA/AML regime to combat
criminal activity, money laundering, and terrorist financing—all of
which are top priorities for this administration. Consequently, the
burden and cost associated with ensuring compliance will continue
to rise. And when banks fail to meet their compliance obliga-
tions, there will be supervisory and enforcement consequences
for these institutions. Although the larger financial regulatory
landscape may significantly change under this administration,
all signs indicate that enforcement of the BSA/AML regulatory
regime will continue in much the same way it has over the last
several decades. ■
ABOUT THE AUTHORS
DANIEL P. STIPANO is a partner at Buckley Sandler, LLP., in
Washington, D.C. He advises on bank regulatory and compliance
issues, represents clients in banking enforcement actions, and
provides assistance in regard to BSA/AML compliance programs.
Prior to joining the firm, he was the Deputy Chief Counsel for the
Office of the Comptroller of the Currency. He can be reached at
ELLEN M. WARWICK is senior counsel at the firm in Washington,
D.C. She advises on all aspects of bank regulatory and compliance
issues, represents clients in banking enforcement actions including
investigations, and provides assistance in establishing and maintaining BSA/AML compliance programs. Prior to joining the firm,
she was the Director of Enforcement and Compliance for the OCC.
She can be reached at email@example.com.
BRENDAN M. CLEGG is an associate at the firm in Washington, D.C.
He provides counsel on regulatory and enforcement matters, with a
focus on BSA/AML. He can be reached at firstname.lastname@example.org.
BENJAMIN W. HUT TEN is an associate at the firm in New York City.
He provides regulatory and compliance counsel, with a focus on
AML and financial sanctions. He can be reached at
1 U.S. Department of the Treasury, A Financial System That Creates
Economic Opportunities: Banks and Credit Unions (June 2017), available
2 For an overview of the CDD rule, see Daniel P. Stipano, Ellen M. Warwick
& Benjamin W. Hutten, FinCEN’s Customer Due Diligence and Beneficial
Ownership Rule, The Review of Banking & Financial Services (Aug. 17,
2017), available at
3 See Senate Finance Committee, Hearing on the Nomination of Steve
Mnuchin to be Secretary of the Treasury (Jan. 30, 2017).
4 See Federal Financial Institutions Examination Council, Joint Statement:
Cyber Attacks Involving Extortion (Nov. 3, 2015), available at https://
Attacks%20Involving%20Extortion.pdf; Financial Crimes Enforcement
Network, Advisory to Financial Institutions on Cyber-Events and Cyber-Enabled Crime, FIN-2016-A005 (Oct. 25, 2016), available at https://www.
Although the larger financial regulatory
landscape may significantly change under
this administration, all signs indicate that
enforcement of the BSA/AML regulatory
regime will continue in much the same
way it has over the last several decades.