Elevating Your Business with the BSA/AML Review

This month, we are covering the annually mandated Bank Secrecy Act (BSA)/Anti-Money Laundering (AML) review. While taking a “review break” can be tempting, especially for smaller lenders who feel budget pressure the most, the essence of the BSA/AML review goes beyond checking a regulatory compliance box. In fact, these reviews can be a strategic investment in the stability and successful growth of your business. How? Compliance with the BSA/AML regulations is an essential tool to safeguard against financial crimes, protect your enterprise’s reputation, and ensure long-term business health.

In a Nutshell: What is a BSA/AML Review?

While the Bank Secrecy Act (BSA) serves as the foundational US law, Anti-Money Laundering (AML) refers to the broader global framework of practices and regulations aimed at preventing financial crime. Check out our simplified comparison chart to identify the key differences in scope, requirements, and enforcement.

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A BSA/AML review assesses a mortgage lender’s level of compliance with both the BSA and applicable AML standards and covers the areas of evaluation as seen in the image to the left (click on the image to enlarge).

The Importance: Protecting Your Business and Your Reputation

Given their role in handling significant financial transactions, mortgage lenders can be vulnerable to illicit activities such as money laundering and terrorist financing. A thorough BSA/AML review helps to ensure a lenders AML program is detecting suspicious activities early, so that lenders protect their business and remain compliant with regulatory requirements.

In addition, periodic reviews help foster the much needed “culture of compliance”. This is when the entire organization understands the importance of implementing regulations, is aware of individual responsibilities and performs compliant procedures throughout the mortgage process. As we all know, fraud is a non-starter in mortgage and for which investors, insurers and guarantors have zero tolerance. A well-implemented BSA/AML program is a foundational element that helps build, maintain and pressure-test this valuable organizational culture trait.

The Real Impact of BSA/AML Compliance

We know that non-compliance can lead to penalties, enforcement actions, reputational damage and even criminal sanctions, but what can really happen if a lender doesn’t perform just one review?

A lot.

It might look like skipping a BSA/AML review could save precious funds in the short run, but the consequences run deep. That’s because a robust BSA/AML program goes beyond reducing compliance worries. It also helps find and mitigate the business issues that impact margins and stakeholder trust and can upend business continuity.

Impact 1: Builds Trust and Confidence

Looking to attract more customers? Raise a new round of growth funds? Ink a strategic partnership?

Trust is paramount in mortgage.

Investors and stakeholders expect strong compliance programs to reduce their risk. Lack thereof reduces the perceived value of your business. Demonstrating a commitment to thorough BSA/AML compliance can help set you apart from competitors. Customers and investors are more likely to engage with a lender that prioritizes loan quality, transparency, and integrity.

When clients trust you, they come back, bringing investor confidence and greater financial stability with them.

Impact 2: Improves Business Efficiencies

Looking to improve customer service? Reduce costs? Eliminate bottlenecks? A BSA/AML review can help you uncover operational issues and unlock new efficiencies by: 

• Identifying Operational Process Failures: Testing your risk detection process also puts your broader operational controls to the test. Missed red flags like suspicious transactions or insufficient collateral can expose your institution to indemnification(s), repurchase demands, targeted examinations and avoidable financial penalties.

• Revealing Gaps in Compliance Execution: Regulatory requirements are embedded at every step of the loan process. A financial fraud review will spotlight inefficiencies in loan-level risk management, giving you a chance to address them before they become costly.   

• Strengthening Staff Readiness: A well-trained team is the first compliance safeguard. A BSA/AML review can show training gaps and opportunities that can reduce long-term error and boost compliance accuracy across the board.  

• Pinpointing Productivity Gaps: A thorough review can reveal where operational friction lives, allowing you to streamline workflows, tighten controls, reduce touchpoints, and cut costs while ensuring loan quality.

Impact 3: Secures Business Continuity   

Lack of compliance can lead to operational interruptions. Unintended failure to comply can stop your business in its tracks. Pro-active reviews highlight risk, save money, and allow you to continue serving customers unabated.   

Critical Elements of an Effective BSA/AML Reviews

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The BSA/AML review guidelines are provided by the Federal Financial Institutions Examination Council (FFIEC), in collaboration with federal and state banking agencies and departments, and with the Financial Crimes Enforcement Network (FinCEN). You can see the main parts of this complex process in the image to the left (click on the image to enlarge).

As technology and regulatory landscapes evolve so are the BSA/AML reviews. Here are new considerations to include:   

• Use of AI for improved data quality and traceability. AI tools can enhance fraud detection, but they also introduce risks related to data privacy, bias, and accountability. It is important to have robust frameworks that ensure ethical and transparent use of AI in your BSA/AML processes.

• Shifting from a reactive to a proactive culture. Real-time compliance systems such as predictive analytics and real-time transaction risk scoring can help lenders predict and detect financial crimes before they occur.

• The complexities of state-level enforcement. States are stepping up their enforcement, which increases the potential for inconsistencies and complexity. Your BSA/AML program must be robust enough to meet varying state regulations, requiring more comprehensive and adaptable review processes.

By identifying hidden risks, uncovering inefficiencies, and strengthening internal controls, BSA/AML reviews can empower mortgage lenders to make smarter decisions, avoid costly pitfalls, and build lasting trust with investors, partners, and regulators alike.

Conforma’s team of compliance experts can guide you through a complete, practical review process tailored to your business so you can operate with confidence and clarity. If you just have a BSA/AML question or need more support, let’s talk!