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Treasury Department Proposes Rule to Enhance Risk-Based Approach to AML/CFT Programs

The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has announced a proposed rule to modernize anti-money laundering and countering the financing of terrorism (AML/CFT) programs for financial institutions.

Strengthening the Financial System

The proposed rule aims to strengthen the financial system by requiring financial institutions to establish AML/CFT programs that are effective, risk-based, and reasonably designed. This approach would enable financial institutions to focus their resources on the highest priority threats, such as fentanyl trafficking and Russian money laundering.

Aligning with Government Efforts

According to Deputy Secretary of the Treasury Wally Adeyemo, the proposed rule is a critical step in building a more effective and risk-based AML/CFT regulatory regime that aligns with the government’s efforts to combat illicit financing. “Financial institutions are partnering with law enforcement to address serious threats, from fentanyl trafficking to Russia’s illegal invasion of Ukraine,” said Adeyemo. “This proposed rule directs financial institutions to focus their AML/CFT programs on the highest priority threats.”

Key Components of the Proposed Rule

• Financial institutions would be required to establish a mandatory risk assessment process as part of their AML/CFT programs.
• Institutions would need to review government-wide AML/CFT priorities and incorporate them into their risk-based programs.
• The proposal seeks to promote clarity and consistency across FinCEN’s program rules for different types of financial institutions.

Impact on the Financial Industry

The proposed rule is expected to have a significant impact on the financial industry, as it would require financial institutions to adapt their AML/CFT programs to focus on high-priority threats. The rule would also encourage financial institutions to modernize their AML/CFT programs and take into account the effects of financial inclusion.

Public Comment Period

The public has 60 days to comment on the proposed rule, which was published in the Federal Register today.

Note: This is a proposed rule and is subject to change based on comments received during the public comment period.