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    FFIEC Updates BSA/AML Manual; OCC to Further Its Work on Climate Risk

    December 03, 2021

    The Federal Financial Institutions Examination Council (FFIEC) updated the Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual, which provides instructions to examiners for assessing the adequacy of a bank’s or credit union’s BSA/AML compliance program and its compliance with BSA regulatory requirements. The updates include a new section on the introduction of customers and three updated sections on charities and nonprofit organizations, independent automated teller machine owners or operators, and politically exposed persons. These sections provide information (and considerations related to certain customers) that may indicate the need for bank policies, procedures, and processes to address potential money laundering, terrorist financing, and other illicit financial activity risks.

    Additionally, the Office of the Comptroller of the Currency (OCC) is soliciting academic-focused papers and policy-focused research on climate risk in banking and finance for presentation to the OCC on June 06-07, 2022. Interested parties are invited to submit papers or a one-page extended abstract/executive summary by March 11, 2022. OCC anticipates selecting six to ten papers for presentation and discussion. Areas of interest include but are not limited to:

    • Physical risks directly arising from climate change. This would include topics such as flood risk to physical bank collateral, most notably real estate; the effect of other natural disasters on the finance or insurance industry; and the methodology behind the models that predict those risks.
    • Transition risks from climate policies, technological innovation, consumer sentiment, or investor sentiment. Net zero goals and their effects on key segments of the finance industry; integrated assessment models and their usage in a climate-risk loss forecasting context.
    • Differential community impact. The effect that climate-related risks have on potentially vulnerable communities and their access to financial services.
    • Climate risk modeling and stress testing. Methodology and models of approaches that attempt to demonstrate any of these risks on banks and their obligors, along with regulatory experiences with such approaches.
    • Environmental, social, and corporate governance (ESG) ratings and regulatory reliance. Derivation of ESG rating methodologies; their effects on investor behavior and capital flows; and regulatory reliance on these ratings across the world.

    OCC also published remarks of Acting Comptroller of the Currency, Michael J. Hsu, related to climate change risk. His remarks highlighted five questions that boards of directors of large banks should ask to promote and accelerate improvements in climate risk management practices at their banks. These questions are related to overall exposure to climate change, exposure to carbon tax, vulnerability of data centers and other critical services to extreme weather, potential impact of climate change on counterparties and sectors, and seizing opportunities from climate change.


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    Keywords: Americas, US, Banking, Bank Secrecy Act, AML/CFT, Climate Change Risk, ESG, Transition Risk, Stress Testing, Carbon Taxation, FFIEC, OCC

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