Federal Reserve Semiannual Report Highlights Impact of BSA/AML Compliance Issues on M&A

May 1, 2015

On April 30, 2015, the Federal Reserve released its second Semiannual Report on Banking Applications Activity, which includes aggregate statistics regarding the consideration and disposition of merger and acquisition proposals, including the primary reasons for withdrawals.  
In reviewing merger and acquisition proposals by financial institutions, the Federal Reserve considers, among other things, the applicant’s BSA/AML compliance program. The semiannual report indicates that BSA/AML compliance program issues were at the core of approximately 18 percent of the proposals that were withdrawn in the second half of 2014 because of significant issues regarding the statutory factors that the Federal Reserve must consider. The Federal Reserve’s first Semiannual Report on Banking Applications Activity, in contrast, did not specify the number withdrawn on account of BSA/AML compliance program issues. The highlighting of BSA/AML compliance program issues in the second semiannual report suggests that BSA/AML compliance remains a key factor in a financial institution’s ability to receive regulatory approval for merger and acquisition transactions.
Further information concerning the Federal Reserve’s Semiannual Report on Banking Applications Activity may be found in last year’s memorandum to clients.