OCC, Treasury Say Go Light on Regulation, Heavy on AML

OCC Comptroller Jonathan V. Gould and Treasury Secretary Scott Bessent outlined efforts generally to ease regulatory burdens on community banks while protecting the financial system from illicit activity linked to unauthorized work populations.

Speaking at an Arizona Bankers Association roundtable, Mr. Gould said the OCC has refocused supervision on material financial risk and dropped examination activities not required by statute or regulation. He also noted that the agency has (i) joined the other federal banking regulators in expanding eligibility for the Community Bank Leverage Ratio, (ii) lowered assessment rates, (iii) finalized a Reputation Risk Rule with the FDIC barring reliance on subjective reputational-risk judgments, and (iv) proposed changes to Confidential Supervisory Information rules to ease information sharing in routine business matters.

At that same event, Mr. Bessent argued that the Dodd-Frank Act ("Wall Street Reform and Consumer Protection") created a "too small to succeed" environment, noting that half of community and small banks have vanished since the financial crisis. He added that the administration wants Main Street banks to have the same chance to succeed as Wall Street firms.

On illicit finance, both officials stressed banks' role in national security, especially in border states like Arizona. Mr. Bessent said a recent executive order ("Restoring Integrity to America's Financial System") directs regulators to ensure banks aren't used to facilitate unlawful conduct by unauthorized work populations. He additionally noted a June FinCEN advisory on detecting related schemes, as well as recent guidance issued by the OCC with the FDIC and the National Credit Union Administration on credit risks tied to such lending ("Lending to Individuals Not Legally Authorized to Work in the United States").

Mr. Gould said the guidance reaffirms safe and sound banking principles, noting that a borrower's lack of legal work authorization can present elevated credit risk due to an inability to generate income.