By PAUL O’DONOGHUE, Senior Correspondent
FINCEN has proposed a rule which it said would “fundamentally” reshape how U.S. financial institutions manage their AML prgrams.
The rule is part of Treasury efforts to modernize the U.S. AML/CFT framework and reduce compliance burdens.
FincEN said that the proposed rule will include the following key changes to AML/CFT program compliance and supervision:
- Refocusing compliance obligations on effectiveness
- Reinforcing that banks are “best positioned to identify and evaluate their illicit finance risks”
- Allowing financial institutions to prioritize higher-risk areas rather than spending resources on lower-risk activity.
- “Clarifying expectations” for program functions, including independent testing and audits, so examiners do not replace banks’ risk-based judgment with their own.
- Strengthening FinCEN’s supervisory role through a notice and consultation process with federal banking supervisors for significant AML/CFT actions.
“The proposed rule would promote risk-based programs and greater consistency in how banks are evaluated for effectiveness,” the Treasury said.
Treasury Secretary Scott Bessent added: “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.
“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.”
FinCEN proposes major AML reforms
Under the proposed rule, establishing a program would require a financial institution to design a risk-based AML framework “incorporating four core required pillars”. These are:
- Internal policies, procedures, and controls including risk assessment processes and customer due diligence
- Independent program testing
- Designation of a U.S.-based compliance officer
- Ongoing employee training
“Establishing an AML/CFT program would also require keeping the program current as a financial institution’s risk profile evolves,” FinCEN said. A Fact Sheet on the proposals is available [HERE].
The rule fully replaces a previous proposed rule published on July 3, 2024, which FinCEN is withdrawing.
FinCEN will publish the proposal in the Federal Register and is inviting public comment. The full Notice of Proposed Rulemaking (as submitted to the Federal Register) is available [HERE].
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