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Model Risk Management’s Role With BSA/AML Compliance

Posted in Financial Crime Consulting, Insights, MRM

On April 9, 2021, the Joint Regulatory Agencies issued a statement to address how the Supervisory Guidance on Model Risk Management (MRMG) applies to models used by financial institutions (FIs) to assist in complying with BSA laws and regulations. The statement is not meant to change or add requirements. Instead, it clarifies and highlights the importance of establishing sound risk management practices when implementing and maintaining models that are intended to assist with BSA/AML compliance. While this guidance does not explicitly outline specific requirements, it does highlight key points such as:

“The term model refers to a quantitative method, system, or approach that applies statistical, economic, financial, or mathematical theories, techniques, and assumptions to process input data into quantitative estimates.”

Some BSA/AML models may fit this definition while others will not. FIs are encouraged to evaluate their system to determine it if fits the definition of a model. Management should adequately document and support their conclusion.

Since 2015, VBC has been providing MRMG compliant BSA/AML, Fraud and OFAC model validation services that are customized to meet each institution’s needs while adhering to and meeting all mandated regulatory guidelines. Our qualified CAMS certified specialists combine a risk-based approach with qualitative and quantitative validation methodologies to ensure the accuracy of data inputs and to offer strategies to enhance model processing and output efficiency. VBC is the leading independent provider of risk management solutions for financial institutions.

Get more information about our BSA/AML services.

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