Washington. D.C. – The Bank Policy Institute and The Clearing House Association today issued recommendations to the U.S. Department of the Treasury as part of Treasury’s request for information to modernize the Bank Secrecy Act. The recommendations aim to align Bank Secrecy Act requirements with the growth of digital asset technologies and the adoption of emerging technologies that enhance banks’ ability to combat illicit finance.
“A financial crime is a financial crime, whether it happens in a bank branch or on the blockchain,” the associations stated after filing the letter. “Banks are in an arms race with increasingly sophisticated global criminals, and the laws designed to prevent financial crime must match the latest technologies and tactics. These recommendations position the AML framework to evolve alongside innovation, not behind it.”
Why This Matters: America’s anti-money laundering laws must be flexible enough to adapt to new technologies and respond to more sophisticated illicit finance tactics. Technology contributes to a safer financial system; however, rules must apply consistently to the riskiness of an activity, not the technology or the type of company engaged in those activities.
Our Recommendations:
- Apply anti-money laundering rules consistently. Apply “same activity, same risk, same rules” across traditional banks and digital asset firms and clearly define when entities must comply with Know Your Customer obligations.
- Encourage banks to adopt technologies that help combat illicit finance. Allow financial institutions to experiment and adopt proven new technologies, such as AI, machine learning and digital ID, through clear and consistent guidance and coordination among federal banking agencies. The banking regulators should not require banks to maintain legacy systems without clear and reasonable phase-out periods.
- Rescind the existing model risk management guidance, which stifles innovation. Financial crimes monitoring platforms should not necessarily be treated as “models” subject to the same standards as other models, such as those created for capital and liquidity requirements.
- Improve information sharing. Remove existing restrictions or create a safe harbor so banks can share illicit finance intelligence with law enforcement, national security experts and other affected industries.
- Bring DeFi into the regulatory framework. Clarify when decentralized finance actors must adhere to digital asset service provider rules.
To access a copy of the letter, please click here.
###
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.
About The Clearing House Association.
The Clearing House Association L.L.C., the country’s oldest banking trade association, is a nonpartisan organization that provides informed advocacy and thought leadership on critical payments-related issues. Its sister company, The Clearing House Payments Company L.L.C., owns and operates core payments system infrastructure in the U.S., clearing and settling more than $2 trillion each day.
