banks and other financial institutions to safeguard the payment system. our laws and regulations increasingly bring the industry into partnership with the government on combatting national security risks to the united states and financial crime. anti - money laundering is not just a matter of historical record. our rules continue to evolve. for example, in 2016 the treasury department updated its regulations to require that banks and other financial institutions verify the identity of the natural persons — that is, the “ beneficial owners ” — who own or control companies that hold accounts. 4 the beneficial owner rule, like other “ know your customer ” rules, is a regulatory floor, not a ceiling. covered firms can take the initiative to implement more stringent internal rules based on their risk. indeed, in december 2018, the federal banking agencies published guidance that encouraged innovation in anti - money laundering compliance — pilot programs that exceed the legal minima, or at least make compliance more efficient. 5 experiments in ratcheting up internal thresholds are welcome. as i have said in other contexts, one challenge in a rules - based regime is that the pace of rulemaking is not always commensurate with the pace of rule breaking. 6 complying with minimum legal thresholds may not be sufficient in all circumstances to appropriately mitigate risk to your firm or the payment system. 7 technology has greatly expanded access to the payment system. many of us — everyday consumers, that is — effect payments not only directly through our banks, but also through various “ fintech ” intermediaries. there is much good in this, but technology is not riskfree. the creative development and application of technology can create opportunities to improve the payment system. technology also creates new opportunities to compromise that system. take, for example, the nascent challenge presented by the development of digital currencies. the new york state attorney general ’ s office estimates that more than 1, 800 virtual currencies are exchanged around the world. 8 many digital currencies use distributed ledger technologies, which can help institutions achieve efficiencies in customer due diligence programs. distributed ledgers also promote traceability, which in theory assists law enforcement. that said, the use of private exchanges for these digital currencies may facilitate anonymity, which tends to help the bad guys. my concerns, however, are less about the technological frontier, and more about well - established risks to the payment system. recent press reports about financial crimes involving 1mdb, danske bank, swed

capital rule, the three federal banking agencies developed a streamlined, supplemental community bank guide to assist bank management in understanding the applicability of the rules to smaller, non - complex institutions. 10 this exercise is an example of a broader effort to be explicit as to how prudential regulations that are sometimes quite detailed apply to community banks. by including such explanations in the introductory portions of broadly applicable regulations, our hope is that community bankers will be relieved of the task of wading through extensive regulatory texts just to find out what portions apply to their banks. this is a good point at which to note that the federal banking agencies have, in accordance with the terms of the economic growth and regulatory paperwork reduction act ( egrpra ), recently launched a review to identify banking regulations that are outdated, unnecessary, or unduly burdensome. 11 one theme that has already been notable is the belief of community bankers that many regulations could be tailored more appropriately for community banks. i encourage you to participate in the egrpra process by giving us specific examples of regulations that should be modified in this way and, even more helpfully, by suggesting specific ways in which they might be usefully be tailored. 12 as to exempting community banks entirely from certain regulations, i should note first that many of the statutory requirements introduced by the dodd - frank wall street reform and consumer protection act do not by their own terms apply to community banks. so, for example, the extensive enhanced prudential standards required by section 165 of dodd - frank for bank holding companies with more than $ 50 billion in assets do not apply to smaller banks. nor do the requirements for stress testing and resolution planning. 13 similarly, the banking agencies have used their discretion to exclude community banks from the coverage of some new regulations adopted following the crisis. for example, we recently approved a final rule implementing in the united states a basel agreement that establishes a quantitative minimum liquidity requirement, but limited its coverage to banking organizations with more than $ 50 billion in assets. 14 we excluded community and smaller regional banks, which generally have relatively simple funding profiles and do not pose a significant potential risk to the financial system. however, some statutory requirements by their terms apply to all banks. even if we do not believe that they actually advance safety and soundness aims for community banks, or produce only a small benefit at a disproportionately large compliance cost, we must still enforce them. it would be worthwhile to consider amendments to these