The last four years has seen a trend of increased law enforcement and regulatory investigations into financial institutions for sanctions violations and anti-money laundering, or Bank Secrecy Act ("BSA"), compliance. The New York State Department of Financial Services ("NY DFS") has been no exception. NY DFS has recently stated that its investigations have: (i) "uncovered . . . serious shortcomings in the transaction monitoring and filtering programs of these institutions;" and (ii) revealed that "a lack of robust governance, oversight, and accountability at senior levels of these financial institutions have contributed to these shortcomings."
Based upon these findings, the NY DFS has proposed a new anti-terrorism and anti-money laundering regulation (the "Proposed Regulation") which requires that a "Regulated Institution," as defined below, maintain a "Transaction Monitoring Program" and a "Watch List Filtering Program" (collectively, the "Programs"). These requirements are not substantially different than what is already expected by the Bank Secrecy Act and other existing laws, or from what many financial institutions are doing already. What is notable, however (other than NY DFS increasing its enforcement role), is that the Proposed Regulation also includes a requirement that a senior financial executive annually deliver an unqualified certificate to the NY DFS that his or her institution "has sufficient systems in place to detect, weed out, and prevent illicit transactions."
According to the Press Release announcing the Proposed Regulation, the certification requirement is modeled on the certifications required under the Sarbanes-Oxley Act of 2002 ("SOX"). However, the requirements of the Proposed Regulation are more demanding than SOX certification requirements.
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