BSA Modernization Proposal – What Does It Mean for Your Institution?

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In an evolving financial landscape, institutions are being asked to do more with less—and under increasing regulatory scrutiny. One of the most pressing updates in the compliance space is the proposed modernization of the Bank Secrecy Act (BSA). These changes aim to make anti-money laundering (AML) efforts more effective, data more useful, and compliance more aligned with risk. 

But what exactly does this modernization proposal involve—and how might it impact your financial institution? 

 

The Push for Modernization 

The Financial Crimes Enforcement Network (FinCEN), in coordination with federal banking agencies, has been working toward modernizing the BSA framework to improve transparency, streamline processes, and better detect illicit activity. The proposal reflects years of dialogue between regulators and financial institutions about the need for a risk-based approach to BSA compliance, rather than the current “check-the-box” system. 

Notably, the proposed rules would formally require institutions to conduct a BSA risk assessment, elevating a practice that is currently only strongly encouraged. Additionally, under the modernization, institutions will need to revise references to the Bank Secrecy Act throughout their compliance programs—updating the language to refer to an AML/CFT Program (Anti-Money Laundering/Countering the Financing of Terrorism). This means BSA Officer titles, policies, and procedures may need to be renamed or adjusted to align with the new terminology. 

The goal is not simply to add more rules—but to ensure institutions focus their resources where they matter most. 

 

Key Areas of Focus in the Proposal 

Here are some of the core changes being considered: 

  1. Risk-Based AML Program Requirements
    Institutions will be expected to design and implement AML programs specifically tailored to their size, complexity, and risk profile. This represents a shift from standardized practices to institution-specific controls and monitoring. 
  1. Enhanced Usefulness of SARs
    A major objective of the modernization is to improve the usefulness of Suspicious Activity Reports (SARs) for law enforcement. Institutions may be expected to provide more actionable intelligence, with clearer narratives and more thorough documentation of suspicious patterns. 
  1. Stronger Collaboration with Law Enforcement
    The proposal encourages more proactive and structured communication between financial institutions and law enforcement—especially around emerging threats. Institutions that participate in programs like FinCEN’s 314(b) may find themselves in a stronger position under the new rules. 
  1. Leveraging Technology and Innovation
    Regulators are acknowledging the growing role of technology—such as artificial intelligence and automated transaction monitoring—in AML compliance. The proposal supports institutions that adopt innovative tools to enhance compliance effectiveness. 

 

What Financial Institutions Should Be Doing Now 

Although the BSA modernization proposal is not yet finalized, institutions should begin preparing by: 

  • Evaluating their existing BSA/AML program to ensure it aligns with a risk-based framework 
  • Formalizing a comprehensive BSA risk assessment, if not already in place 
  • Updating officer titles, policies, and procedures to reflect the AML/CFT designation 
  • Improving internal documentation and procedures for SARs and CTRs 
  • Exploring partnerships or software solutions that can streamline monitoring and reporting 
  • Training compliance teams on the direction of upcoming changes and what to expect 

Proactively aligning with these expected changes will help institutions make a smoother transition when final rules are issued—and may reduce both regulatory and operational risk. 

 

How Brady Martz Can Help 

At Brady Martz, we help financial institutions navigate complex regulatory environments with clarity and confidence. Our professionals understand the nuances of BSA/AML compliance and can assist with risk assessments, program evaluations, and process improvements tailored to your institution’s needs.