FinCEN Proposes New Rule to Modernize Anti-Money Laundering Programs

The Financial Crimes Enforcement Network (FinCEN), a bureau of the U.S. Department of the Treasury, has announced a proposed rule aimed at strengthening and modernizing anti-money laundering and countering the financing of terrorism (AML/CFT) programs for financial institutions.

According to the federal register notice, the proposed rule titled "Anti-Money Laundering and Countering the Financing of Terrorism Programs" is scheduled to be published on July 3, 2024. Critical aspects of the proposed rule include:

1. Requiring financial institutions to implement AML/CFT programs that are effective, risk-based, and reasonably designed, with mandatory risk assessment processes.
2. Obligating financial institutions to review and incorporate government-wide AML/CFT priorities into their risk-based programs.
3. Promoting consistency across FinCEN's program rules for various types of financial institutions.
4. Introducing a new purpose statement in FinCEN's regulations describing the goals of the AML/CFT program requirement.
5. Requiring that AML/CFT programs be approved and overseen by a financial institution's board of directors or equivalent body.

The proposed rule emphasizes the importance of risk assessment, requiring financial institutions to identify, evaluate, and document their risks. This process must consider the AML/CFT Priorities issued by FinCEN, the institution's specific money laundering and terrorist financing risks, and reports filed under FinCEN regulations.

Deputy Secretary of the Treasury Wally Adeyemo emphasized the importance of this rule in addressing critical law enforcement and national security issues, stating, "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."

FinCEN Director Andrea Gacki described the proposal as "a significant milestone" in implementing the AML Act, highlighting its role in protecting the financial system from both longstanding and emerging threats.

The proposed rule also aims to discourage a one-size-fits-all approach to customer risk, which can lead to financial exclusion. Instead, it encourages financial institutions to innovate responsibly while managing illicit finance risks. This aligns with one of the AML Act's purposes to encourage technological innovation in countering money laundering and terrorism financing.

Furthermore, the proposal seeks to facilitate more robust feedback loops among FinCEN, law enforcement, financial regulators, and financial institutions, building on provisions in the AML Act related to information sharing and threat pattern analysis.

This proposal was developed in consultation with key financial regulatory bodies, including the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the National Credit Union Administration.

The announcement marks a significant step in the ongoing efforts to modernize and strengthen the U.S. financial system's defenses against money laundering and terrorist financing. FinCEN views this as a critical foundation for potential future changes in the AML/CFT framework as part of the multi-step, multi-year implementation of the AML Act.

Financial institutions and industry stakeholders will likely be closely monitoring the development and implementation of this proposed rule. Once officially published in the Federal Register on July 3, 2024, it will provide legal notice to the public and judicial notice to the courts under U.S. law. The lengthy document suggests a comprehensive overhaul of existing regulations, reflecting the complexity and importance of updating the AML/CFT framework in the United States. Interested parties should refer to the official Federal Register publication for the full details and legal implications of this proposed rule.

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