The good news: most banks of all sizes take their Bank Secrecy Act obligations and anti-money laundering efforts seriously, even if a handful of notable failures have dominated headlines. But, according to Comptroller of the Currency Thomas Curry, bank compliance programs still have plenty to improve upon and boards and top executives must take an active role or suffer the consequences.

“There's a reason why I've addressed our concerns to senior executives, including the chief executive officers, of the banks and thrifts we supervise,” Curry said this week in remarks at the Association of Certified Anti-Money Laundering Specialists' annual conference in Florida. “When we look at the issues underlying BSA infractions, they can almost always be traced back to decisions and actions of the institution's board and senior management.”

Underlying deficiencies typically fall into four areas: the culture of compliance within an organization, the resources committed to BSA compliance, the strength of the organization's information technology and monitoring process, and the quality of risk management, Curry explained. “For the most part, they are qualities that have an impact well beyond BSA and AML compliance,” he said. “They go a long way toward explaining how well an institution deals with credit and operational risk."

Lapses that have prevented banks from maintaining an adequate BSA program often affect other areas and extend throughout the institution. Information technology is as important to managing credit risk as it is to managing operational risk, of which BSA is a part, Curry said.

“It is critical that the board and senior management set the right tone and that their message permeate the entire organization,” he said. “Not only must the board and senior management send the right message, but they need to ‘walk the talk' by ensuring that there is an alignment between good compliance practices and the bank's system of compensation and incentives.”

Part of “walking the talk” is providing increased resources, increasing the authority and stature of the BSA Officer within the organization, and ensuring proper incentives are incorporated throughout the organization, including the business lines, he explained, adding that there are “hopeful signs” in that some of our largest banks are significantly increasing spending and adding substantial numbers of employees to this area. “Some of the commitments and improvements we are seeing are truly impressive,” he said.

Curry also stressed the need for clear lines of accountability that may extend all the way to the corner office. "Accountability and lines of responsibility are usually crystal clear at community banks,” he said. “At large, complex, globally active institutions, where we have heightened expectations, it is much less clear and those lines are often blurred.” He posed the question of whether, from a risk management and corporate governance standpoint, it is time to require large banks to establish clear lines of accountability that  hold senior executives responsible for serious compliance breakdowns that lead to BSA program violations.

That doesn't mean that a senior executive in New York, for example, should be held responsible if an account officer in South America decides to turn a blind eye to suspicious transactions, nor does it penalize honest mistakes, errors in judgment, or minor failures in compliance, Curry said. However, many BSA compliance failures have resulted from collective decision over a long period of time and it is very difficult to attribute these failures to the acts of a single individual within a bank and "that has to be changed.”

“Management needs to eliminate these accreted compliance weaknesses so that institutional structural flaws do not become an excuse for a lack of accountability," he said. "Where there has been a serious breakdown in BSA compliance as a result of a conscious decision not to commit the requisite resources and expertise necessary to maintain a program that meets the requirements of the law, someone has to be accountable.”

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