Rule would ‘explicitly’ require banks, credit unions to adopt ‘effective, risk-based’ AML/CFT programs

Financial institutions would be “explicitly” required to adopt anti-money laundering and countering the financing of terrorism (AML/CFT) programs that are effective, risk-based, and reasonably designed under rules proposed Friday by the Treasury’s financial crimes arm.

The Financial Crimes Enforcement Network (FinCEN) said the proposal is designed to enable financial institutions “to focus their resources and attention in a manner consistent with their risk profiles.”

More specifically, the agency said the 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;
  • promote clarity and consistency across FinCEN’s program rules for different types of financial institutions.

FinCEN said the proposal is based on changes to the Bank Secrecy Act (BSA) enacted by the Anti-Money Laundering (AML) Act of 2020. The agency said the proposal is a “key component of Treasury’s objective of a more effective and risk-based AML/CFT regulatory and supervisory regime.” It was also developed, the agency said, in consultation with the federal banking agencies and the National Credit Union Administration (NCUA). FinCEN said it did so “in order to collectively issue proposed amendments to their respective BSA compliance program rules for the institutions they supervise.”

The proposal also articulates, FinCEN said, 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,” FinCEN said.

The agency added that the proposal is “consistent with a key recommendation in Treasury’s “De-risking Strategy,” which it noted 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, FinCEN said, the proposed rule would encourage financial institutions to modernize their AML/CFT programs where appropriate to responsibly innovate, while still managing illicit finance risks.

FinCEN Proposes Rule to Strengthen and Modernize Financial Institution Programs Designed to Fight Money Laundering and Terrorist Financing

Be the first to comment

Leave a Reply

Your email address will not be published.