The US Office of the Comptroller of the Currency (OCC) has announced an update to its Bank Secrecy Act/Anti-Money Laundering (BSA/AML) examination procedures for community banks. This change, effective from February 1, 2026, is designed to streamline compliance reviews while maintaining robust protection for anti-financial crime standards.
Fraud and financial crime remain a persistent threat globally, and regulators continue to emphasize vigilance. By adopting a more tailored approach to anti-financial crime activities across community banks, the OCC aims to balance efficiency and effectiveness, which means these banks may be better able to direct resources towards areas that present the most significant risks to their operations.
For risk and compliance teams in community banks, this update represents a procedural shift, providing an opportunity to strengthen governance, optimize compliance processes, focus on security, and reinforce trust with regulators and customers alike.
Community banks in the US play a vital role in local economies offering loans, credit, savings, checking accounts, and more. However, the compliance requirements on such banks may feel disproportionate when compared to larger institutions in the US.
The OCC’s revised procedures aim to reduce unnecessary regulatory strain on community banks without compromising the integrity of the overall US financial system.
By recommending and adopting a risk-based approach to AML, the OCC is acknowledging that smaller banks will typically represent a lower risk when it comes to exposure to money laundering and/or terrorist financing.
This update aligns with the OCC’s broader initiative to support community banks while reinforcing the importance of effective BSA/AML controls. It also reflects ongoing efforts to harmonize with other supervisory practices to drive greater consistency across regulatory frameworks in the US.
Community banks supervised by the OCC are the primary beneficiaries of the changes. Community banks can broadly be defined as depository institutions with less than $30 billion in total assets, typically serving local communities and generating most of their annual revenue—often in the hundreds of millions of dollars—from net interest income on assets through consumer, small business, and local mortgage lending.
These are the institutions who could see a more tailored and proportionate approach to BSA/AML examinations, streamlining regulatory activities while maintaining strong expectations around anti-financial crime compliance. And while the updates may ease some regulatory burdens, robust frameworks and controls remain important to prevent bad actors, including fraudsters and scammers, from using community banks.
While the OCC’s changes aim to reduce burden, they don’t necessarily signal a relaxation of enforcement. Examiners, for example, would still expect robust AML control frameworks, and deficiencies could lead to enforcement actions, including civil money penalties.
The updates permit frontline examiners at the agency to use their discretion in 1) using prior year conclusions for the BSA Officer and Training pillars; 2) relying on the institution's independent testing to form their exam conclusions; and 3) setting transaction testing requirements.
Compliance teams within community banks may want to consider:
The updated procedures are expected to apply to examinations beginning February 1, 2026. Between now and then, in order to prepare, community banks could consider:
As regulatory expectations evolve, staying informed is important. Compliance leaders may also want to monitor OCC communications and industry guidance to maintain ongoing alignment with best practices.
Moody’s know your customer (KYC) and AML solutions provide powerful data sources for CDD and AML activities, along with automated workflows that can help community banks streamline tasks in line with their control frameworks.
These solutions support a risk-based approach to compliance activity as institutions can gather data and create low-, medium-, and high-risk customer profiles. Whether onboarding customers through straight-through processing (STP) or escalating higher-risk cases for deeper review, Moody’s solutions can make it easier to come to more efficient and effective decisions.
For more information on Moody’s KYC and AML solutions for financial institutions of all types and sizes, please get in touch with the team at any time. We would love to hear from you.
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