OCC’s Oversight of Risk Models Brings New Scrutiny to AML Controls

By Brian Monroe and Kieran Beer

A U.S. Treasury Department division charged with reviewing how financial institutions make use of complex risk models has begun asking questions about how companies calculate money laundering risks. The department's Office of Comptroller of the Currency (OCC) published updated supervisory guidance on model risk management in April but did not specify at the time whether its Risk Analysis Division (RAD) should quiz financial institutions about models related to the Bank Secrecy Act (BSA). The division, which has typically evaluated models on enterprise, credit and market risk, has shifted some of its focus toward reviewing how banks model customer risk scoring...