FinCEN Proposed Rule to Strengthen and Modernize Financial Institution AML/CFT Programs

In June 2024, the Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) proposed a rule to ‘strengthen and modernize financial institutions’ Anti-Money Laundering (“AML”) and countering the financing of terrorism (“CFT”) programs. While financial institutions have had to comply with longstanding existing AML requirements, under the new proposed rule they would explicitly be required to establish a risk-assessment process that incorporates the AML/CFT priorities, the firm’s specific money laundering, terrorist financing, or other illicit finance risks, and a review of reports filed by the firm.

Of note, the current definition of a financial institution does not include investment advisers. However, a pending FinCEN proposal will bring advisers within this definition.​

Based on the AML/CFT proposed rule, the key risk-assessment requirements would include the following for financial institutions:

• They would need to assess their “distribution channels,” that is, the methods and tools that they use to open accounts and provide products or services—for example, using remote or other non-face-to-face means to offer services.
• They would also need to consider “intermediaries,” which include customer and noncustomer relationships (e.g., service providers, vendors, or third parties), that may pose money laundering, terrorist financing, or other illicit finance risks.
• And finally, they would be required to review and evaluate reports they file with FinCEN, including suspicious activity reports, currency transaction reports, Form 8300, and other relevant Bank Security Act (“BSA”) reports.

The proposed rule would also require, at a minimum, that risk assessments be reviewed and updated when material changes occur to the firms’ products, services, distribution channels, customers, intermediaries, and geographic locations.

For clarification, the proposed rule mentioned the inclusion of the reference to “countering the financing of terrorism” in addition to “anti-money laundering” when describing the requirement to establish an AML/CFT program. FinCEN does not anticipate that this specific change will create new compliance obligations. The new rule would define an “AML/CFT program” as a system of internal policies, procedures, and controls meant to ensure ongoing compliance with the BSA and the financial crimes requirements and prohibitions.

Since the proposed rule would affect many financial institutions, FinCEN is proposing an effective date of six months from the final rule’s date of issuance to allow firms sufficient time to review and implement the requirements. The comment period is open until September 3, 2024.

Read about other proposed AML rules

AML Obligations May Be Coming for Investment Advisers

FinCEN and the SEC Propose Customer Identification Programs for Advisers

How we help

ACA’s AML and Financial Crimes practice offers advisory services and solutions to assist financial services firms in addressing threats and regulatory obligations associated with financial crime. We work with investment advisers and broker-dealers, among others, to assess risk, develop policies and procedures, and perform independent tests and gap analyses.

Our support can incorporate our ComplianceAlpha^® regulatory technology and managed services to help your firm meet its data screening, ongoing monitoring, remediation, and reporting needs.

Reach out to your ACA consultant or contact us to find out how ACA can help you meet your AML requirements.