Independent testing is a required pillar of a BSA/AML program. The Board of Directors is ultimately responsible for ensuring that the BSA/AML Program is running smoothly and working as intended. The independent test also helps direct the examiners areas of focus during an exam. Back in 2019, FinCEN issued a Joint Statement on the risk-focused approach to BSA/AML supervision. The idea is that having a risk-focused approach allows examiners to allocate more resources to higher-risk areas and fewer resources to lower-risk areas when conducting BSA/AML examinations, specifically when it comes to an institution’s BSA/AML Risk Assessment and Independent Testing. A well-developed risk assessment is a critical part of sound risk management and assists examiners in understanding the bank’s risk profile. An Independent Test that properly considers and tests all risk areas (including products, services, customers and the geographic locations in which the bank operates and conducts business) is used in determining the examination procedures and transaction testing that should be performed.
Kevin explains more about independent testing in the video.