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Testing the Limits of Bank Officer Accountability – The NYDFS AML Personal Liability Proposal

The New York Department of Financial Services ("NYDFS") is currently soliciting public comment on a proposed regulation that would require certain NYDFS-regulated financial institutions ("Regulated Institutions")[1] and their senior-level management to comply with more stringent anti-terrorism and anti-money laundering ("AML") standards, and impose potential criminal sanctions on senior executives for failure to comply ("Proposed Regulation").[2] The proposal follows a series of high-profile enforcement actions taken by the NYDFS in recent years, including record-setting settlements involving violations of the Bank Secrecy Act ("BSA"), U.S. AML laws, and U.S. sanctions laws.[3] The Proposed Regulation, announced by Governor Andrew Cuomo on December 1, 2015, seeks to codify the New York regulator's heightened expectations for financial institutions' compliance and risk-management programs and affirms the NYDFS’s previously-expressed intention to exact more individual accountability from senior executives of Regulated Institutions.[4]

In addition to requiring Regulated Institutions to strengthen their existing BSA/AML compliance programs, the Proposed Regulation also contains an annual certification provision that requires the chief compliance officer, or other applicable senior executive, of each Regulated Institution to certify that the institution has sufficient systems in place to detect, filter, and prevent illicit transactions.[5] Comments on the Proposed Regulation are due by January 30, 2016.

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[1] - If enacted, these requirements will apply to certain financial institutions currently regulated by NYDFS, namely all New York-chartered banks, trust companies, private bankers, savings banks, and savings and loan associations; all foreign banking corporations licensed pursuant to the New York Banking Law to conduct banking operations in New York; and all check cashers and money transmitters licensed pursuant to the New York Banking Law. Proposed Regulation § 504.2(b), (d) and (e).
[2] - New York Department of Financial Services Superintendent's Regulations, Banking Division Transaction Monitoring and Filtering Program Requirements and Certifications ("Proposed Regulation"), N.Y. Reg. (December 16, 2015), at 9, adding Part 504. See NYDFS Press Release dated Dec. 1, 2015 and link to Proposed Regulation, available here.
[3] - See 31 U.S.C. 5311, et seq. and 31 CFR Chapter X. The NYDFS expressly designed the Proposed Regulation to address the findings of recent investigations that identified shortcomings in financial institutions' transaction monitoring and filtering programs and a “lack of robust governance, oversight, and accountability at senior levels of these institutions [that] has contributed to these shortcomings." Proposed Regulation § 504.1.
[4] - Speech by Benjamin M. Lawsky, Superintendent of Financial Services for the State of New York, Financial Federalism: The Catalytic Role of State Regulators in a Post-Financial Crisis World ("Lawsky Speech") (Feb. 25, 2015), available here:
[5] - Id.


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