Bank regulation in the United States is highly fragmented compared with other G10 countries, where most countries have only one bank regulator. In the U.S., banking is regulated at both the federal and state level. Depending on the type of charter a banking organization has and on its organizational structure, it may be subject to numerous federal and state banking regulations. Unlike Japan and the United Kingdom (where regulatory authority over the banking, securities and insurance industries is combined into one single financial-service agency), the U.S. maintains separate securities, commodities, and insurance regulatory agencies—separate from the bank regulatory agencies—at the federal and state level.
U.S. banking regulation addresses privacy, disclosure, fraud prevention, anti-money laundering, anti-terrorism, anti-usury lending, and the promotion of lending to lower-income populations. Some individual cities also enact their own financial regulation laws (for example, defining what constitutes usurious lending).
A bank's primary federal regulator could be the Federal Deposit Insurance Corporation, the Federal Reserve Board, or the Office of the Comptroller of the Currency. Within the Federal Reserve Board are 12 districts centered around 12 regional Federal Reserve Banks, each of which carries out the Federal Reserve Board's regulatory responsibilities in its respective district. Credit unions are subject to most bank regulations and are supervised by the National Credit Union Administration. The Federal Financial Institutions Examination Council (FFIEC) establishes uniform principles, standards, and report forms for the other agencies.
State-chartered banks are also subject to the regulation and supervision of the state regulatory agency of the state in which they were chartered. State regulation of state-chartered banks applies, in addition to federal regulation. For example, a California state bank that is not a member of the Federal Reserve System would be regulated by both the California Department of Financial Institutions and the FDIC. Likewise, a Nevada state bank that is a member of the Federal Reserve System would be jointly regulated by the Nevada Division of Financial Institutions and the Federal Reserve.
State banking laws apply to state-chartered banks and certain non-bank affiliates of federally chartered banks.
By statute, and in accordance with judicial interpretation of statutes and the United States Constitution, federal banking statutes (and the regulations and other guidance issued by federal banking regulatory agencies) often preempt state laws regulating certain activities of nationally chartered banking institutions and their subsidiaries. Specific exceptions to the general rule of federal preemption exist such as some contract law, escheat law, and insurance law.
One example of Office of Thrift Supervision preemption begins with Section 550.136(a) of the OTS Regulations, providing that “...OTS occupies the field of the regulation of the fiduciary activities of Federal savings associations...Accordingly, Federal savings associations may exercise fiduciary powers as authorized under Federal law, including this part, without regard to State laws that purport to regulate or otherwise affect their fiduciary activities, except to the extent provided in 12 U.S.C. § 1464(n)...or in paragraph (c) of this section.” 12 U.S.C. § 1464(n) authorizes fiduciary activities for federal savings associations, and specifies certain state law requirements that are applicable to federal savings associations. Section 550.136(c) lists six types of state laws that, in certain specified circumstances, are not preempted with respect to federal savings associations.
At its core, financial transparency requires financial institutions to implement certain basic controls:
they must know who their customers are (so-called know your customer rules);
they must understand their customers' normal and expected transactions;
and they must keep the necessary records and make the necessary reports on their customers.
The Bank Secrecy Act (BSA) requires financial institutions to assist government agencies to detect and prevent money laundering. Specifically, the act requires financial institutions to keep records of cash purchases of negotiable instruments, file reports of cash transactions exceeding $10,000 (daily aggregate amount), and to report suspicious activity that might signify money laundering, tax evasion or other criminal activities.
Section 326 of the USA PATRIOT Act allows financial institutions to place limits on new accounts until the account holder's identity has been verified.
Office of Foreign Assets Control (OFAC) sanctions apply to all U.S. entities including banks. The FFIEC provides guidelines to financial regulators for verifying compliance with the sanctions.