ICYMI: FinCEN Proposes AML Overhaul

Earlier this year, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and federal banking agencies proposed significant changes to requirements for financial institutions’ anti-money laundering and countering the financing of terrorism (AML/CFT) programs.

The proposals would define an effective AML/CFT program as one that meets applicable program requirements and is implemented in all material respects. They would also make risk assessment a mandatory component. Institutions would need to evaluate their illicit finance risks, consider FinCEN’s AML/CFT priorities, update assessments as risks change, and direct greater attention and resources toward higher-risk customers and activities. Meanwhile, examiners would assess whether such allocation decisions are consistent with a reasonably designed risk assessment and whether resource constraints could prevent effective implementation.

The proposals would also give FinCEN a larger role in supervision and enforcement. Banking agencies would generally need to provide at least 30 days’ written notice before initiating significant AML/CFT supervisory or enforcement actions. In addition, Institutions would need to designate a US-based AML/CFT officer with sufficient authority, independence, qualifications, and resources. The proposals further encourage responsible use of technologies including machine learning and generative AI, and state that such use alone would not increase the risk of significant supervisory or enforcement action.

“For too long, Washington has asked financial institutions to measure success by the volume of paperwork rather than their ability to stop illicit finance threats,” Treasury Secretary Scott Bessent said when FinCEN announced its proposal. “Our proposal restores common sense with a focus on keeping bad actors out of the financial system, not burying America’s banks in more red tape.”