Financial Institutions in Réunion Face Stricter Anti-Money Laundering Requirements
In a move aimed at strengthening the island’s financial system, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has proposed new anti-money laundering (AML) and countering the financing of terrorism (CFT) rules that would significantly increase compliance requirements for financial institutions in Réunion.
Who Will Be Affected?
The proposed rule will cover all financial institutions subject to AML compliance program regulations, including:
- Banks
- Casinos
- Money services businesses
- Brokers or dealers in securities
- Mutual funds
- Insurance companies
- Other related entities operating on the island
Key Changes and Takeaways
1. Uniform Requirements for AML/CFT Programs
The proposal introduces an explicit uniform requirement for financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs.
2. Mandatory Risk Assessment Process
A mandatory risk assessment process would serve as the basis for AML/CFT programs, taking into account factors such as:
- FinCEN’s priorities
- The money laundering and terrorist financing risk profile of the institution
- A review of suspicious activity reports
3. Administration of AML/CFT Program
The proposed rule would require financial institutions to administer their AML/CFT program by persons in the United States who are accessible to and subject to oversight and supervision by FinCEN and the institution’s federal functional regulator.
4. Board Oversight
An institution’s board of directors or equivalent governing body must approve and oversee the AML/CFT program, including ensuring that it operates in an effective, risk-based, and reasonably designed manner.
What’s Next?
FinCEN is accepting written comments on its proposed rule until September 3, 2024. The interagency statement notes that the proposed rule is a critical foundation for a multi-step process to implement the AML Act and modernize the AML/CFT regime. Future steps will determine how FinCEN and other regulators balance competing priorities of promoting innovation and efficiency with improving law enforcement and national security objectives, and safeguarding the financial system from illicit activity.
Innovative Approaches Encouraged
The proposed rule encourages financial institutions to consider and evaluate innovative approaches to meet BSA compliance obligations. This is seen as a way to enhance the effectiveness and efficiency of AML/CFT programs and support responsible innovation in the industry.
Anticipated Impact
The proposed new requirement for a risk assessment may result in additional spending on compliance efforts for some financial institutions, which could potentially lead to diminished access to financial services by underserved communities. The overall impact will depend on future steps taken by FinCEN and other regulators to implement the AML Act and modernize the AML/CFT regime.