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State supervisors and bankers urge exam reform and relief from BSA/AML and CTR burdens
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Summary
Witnesses and members described Bank Secrecy Act/AML compliance and transaction reporting as a major and rising cost for community banks; they also pressed for clearer exam coordination, CAMELS transparency and an independent supervisory appeals process.
A recurrent theme in witness testimony and questioning was the cost and complexity of Bank Secrecy Act (BSA) and anti‑money laundering (AML) compliance, along with frustration about opaque supervisory exams and CAMELS ratings.
Susanna Marshall, Commissioner of the Arkansas State Bank Department, said state supervisors see community banks as “the economic bedrock” of many counties and said that static regulatory thresholds and heavy BSA/AML supervision are “strangling smaller institutions.” She and others called for indexing static thresholds, tailoring AML supervision to institution complexity, and clearer third‑party guidance for fintech relationships.
Cathy Owen, executive chair of Eagle Bank and Trust, told the committee: “We have 4 BSA officers” and said they and other nonrevenue staff must spend substantial time on compliance rather than customer service. Members referenced a December 2024 Government Accountability Office (GAO) finding cited during the hearing that adjusting the Currency Transaction Report (CTR) threshold from $10,000 to $30,000 could cut filersburden by roughly 60%.
Pat Kennedy Jr. and other witnesses described the CAMELS process as subjective and urged reforms that emphasize dynamic trends and clearer definitions. Several members and witnesses supported an independent supervisory appeals mechanism and suggested longer exam cycles for well‑rated, well‑capitalized community banks.
The witnesses also described operational frictions: poor feedback loops from FinCEN on SAR/CTR filings, the administrative burden of onboarding with enhanced KYC procedures, and difficulty recruiting experienced compliance staff. Commissioner Marshall and others said state regulators could conduct targeted exams for smaller banks if federal agencies delegated or coordinated workload more effectively; some members proposed pilots for state‑led exams with federal observers.
No formal regulatory changes were made during the hearing. Committee members requested written follow‑up from regulators and witnesses on CTR thresholds, exam coordination, and BSA/AML modernization options.
