Today, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) announced a proposed rule to strengthen and modernize financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs.
While financial institutions have long maintained AML/CFT programs under existing regulations, this proposed rule would amend those regulations to explicitly require that such programs be effective, risk-based, and reasonably designed, enabling financial institutions to focus their resources and attention in a manner consistent with their risk profiles. Effective, risk-based, and reasonably designed AML/CFT programs are critical for protecting national security and the integrity of the U.S. financial system. The proposed amendments are based on changes to the Bank Secrecy Act (BSA) as enacted by the Anti-Money Laundering Act of 2020 (AML Act) and are a key component of Treasury’s objective of building a more effective and risk-based AML/CFT regulatory and supervisory regime.
“More than ever, financial institutions are partnering with government to address a range of serious law enforcement and national security issues with illicit financing implications, from fentanyl trafficking to Russia’s illegal invasion of Ukraine,” said Deputy Secretary of the Treasury Wally Adeyemo. “It has been an important priority for Treasury to issue this proposed rule that promotes a more effective and risk-based regulatory and supervisory regime that directs financial institutions to focus their AML/CFT programs on the highest priority threats.”
“Today’s publication is a significant milestone in FinCEN’s efforts to implement the AML Act,” said FinCEN Director Andrea Gacki. “The proposed rule is a critical part of our efforts to ensure that the AML/CFT regime is working to protect our financial system from longstanding threats like corruption, fraud, and international terrorism, as well as rapidly evolving and acute threats, such as domestic terrorism, and ransomware and other cybercrime.”
This proposed rule would:
- amend the existing program rules to explicitly require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process;
- require financial institutions to review government-wide AML/CFT priorities and incorporate them, as appropriate, into risk-based programs, as well as provide for certain technical changes to program requirements; and
- promote clarity and consistency across FinCEN’s program rules for different types of financial institutions.
The proposal also articulates certain broader considerations for an effective and risk-based AML/CFT framework as envisioned by the AML Act. For example, through its emphasis on risk-based AML/CFT programs, the proposed rule seeks to avoid one-size-fits-all approaches to customer risk that can lead to financial institutions declining to provide financial services to entire categories of customers. Today’s proposal is consistent with a key recommendation in Treasury’s De-risking Strategy, which recommended proposing regulations to require financial institutions to have reasonably designed and risk-based AML/CFT programs supervised on a risk basis and taking into consideration the effects of financial inclusion. Finally, the proposed rule would encourage financial institutions to modernize their AML/CFT programs where appropriate to responsibly innovate, while still managing illicit finance risks.
The proposal that FinCEN is issuing today was prepared in consultation with the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration in order to collectively issue proposed amendments to their respective BSA compliance program rules for the institutions they supervise.
Written comments on FinCEN’s proposed rule must be received on or before 60 days following its publication in the Federal Register.
Proposed Rule:
https://www.federalregister.gov/public-inspection/2024-14414/anti-money-laundering-and-countering-the-financing-of-terrorism-programs
Fact Sheet:
Program NPRM FactSheet