Reframing Compliance: FinCEN Announces Proposal to Transform AML/CFT Program Standards
The United States government has stayed busy in its efforts to streamline domestic anti-money laundering and terrorism financing initiatives over recent months, with a newly announced proposal from a prominent regulatory body adding further to this trend. The latest announcement made by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) comes in regard to a proposed rule expected to “fundamentally reform” programs established and maintained by financial institutions across the country to fight illicit finance, a measure with the potential to provide major relief with respect to record-keeping and reporting. On April 7th, FinCEN, the bureau of the Treasury tasked with collecting and analyzing financial data to combat domestic and international financial crime proposed regulations that would effectively modernize U.S. AML/CFT regulatory and supervisory framework under the Bank Secrecy Act (BSA), promoting adoption of primarily risk-based, reasonable programs for banks small and large, while boasting claims that the measure will bring greater consistency in how banks are evaluated for effectiveness in this regard. All told, the announcement differs from smaller-scale, technical updates announced in years past and will instead seek to recast how U.S. financial institutions are expected to design, maintain, and be judged on their programs as a whole.
At its core, the proposal reflects a shift away from a checklist model of compliance and moves towards a more tailored, outcomes-oriented framework that should work in the banks’ favor, compounding other deregulatory changes announced by the Trump Administration over the past year. Rather than expecting every institution to approach AML/CFT in the same capacity, FinCEN would instead require covered institutions to build internal policies, procedures, and controls that are “reasonably designed” around their specific money-laundering and terrorist-financing risks. The proposal however will extend beyond traditional financial institutions to cover the greater financial sector, which includes banks small and large, casinos, money services businesses, broker-dealers, mutual funds, insurance companies, futures commission merchants, dealers in precious metals and jewels, credit card system operators, loan or finance companies, and housing government-sponsored enterprises.1
One of the most important features of the rule is a renewed emphasis on risk assessment processes that shifts firms away from “technical compliance” (i.e. the concept of simply meeting their reporting requirements without a significant degree of useful information about tangible threats being acquired in the process). FinCEN’s proposal explicitly requires American FI’s to identify, assess, and document their money-laundering and terrorist-financing risks through one or more risk assessment processes, rather than relying on rigid, one-size-fits-all models that have been established in this space. To increase thoroughness, the proposal states that institutions may use multiple processes instead of a single standalone annual risk assessment, and they would be judged on the totality of those processes as a result. FinCEN has also proposed to require institutions to review the government’s AML/CFT Priorities and incorporate them into risk assessment processes when appropriate, while recognizing that not every priority will fit every institution’s business model or risk profile, with the purpose of improving overall program effectiveness.
Another major change is how supervisory and enforcement consequences will work, especially for banks. FinCEN proposes that once a bank has properly established its AML/CFT program, only “significant or systemic failures” to implement that program in all material respects would justify a formal AML/CFT enforcement action or significant supervisory action. The new rules would also require regulatory agencies to consult with the Treasury before bringing supervisory actions against a bank’s program. In practical terms, that signals a move away from punishing isolated and immaterial shortcomings or lapses in reporting seen over the past two decades, moving towards focusing on whether the institution’s program is genuinely failing in a more meaningful way. This is expected to reduce additional undue strain placed on compliance departments that have long been over-burdened by their obligations in this regard. The proposal also strengthens FinCEN’s own role in supervision, while also giving it a more central role in enforcement of current banking regulations. The rule would reportedly introduce a notice-and-consultation framework between Federal banking supervisors and FinCEN with respect to significant AML/CFT supervisory actions, representing a notable governance change over the current state of affairs. Thus far, the FDIC, OCC, and NCUA each issued coordinated materials regarding these changes on the day of FinCEN’s announcement, with the measure intended to bring banking-agency rules in line with the Treasury’s AML/CFT framework.
Thus far, news of the move has been heralded across the American banking sector, with the measure expected to significantly reduce redundant paperwork filing and concentrate supervisory attention on higher-risk threats and more serious program failures. Legal and industry commentary has likewise focused on the proposal’s attempt to formalize what many institutions have long argued: that AML/CFT compliance should be measured by effectiveness and reasonableness, not by whether every issue can be characterized as a rule violation. At the same time however, the proposal still maintains structure. Institutions would need documented, defensible risk-based systems, and regulators would retain authority when failures are legitimate, systemic, or tied to deficient program design to levy the necessary fines and/or sanctions against firms failing to pull their weight. In the larger policy context, this rule shows that the Treasury is trying to reconcile two competing goals: easing unnecessary compliance burdens while still improving the usefulness of AML/CFT programs for law enforcement and national security.
“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,” said Secretary of the Treasury Scott Bessent. “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.”1
If finalized, the new measure would take effect 12 months after issuance of the final rule, giving institutions time to adjust their internal governance, risk assessment processes, and documentation to cover the ultimate changes. FinCEN is now welcoming public comment on the proposal through June 9th, 2026. The next step will be determining whether industry participants, regulators, and law enforcement can agree on where the line should be drawn with respect to modernizing compliance protocols without sacrificing program quality and effectiveness.
FinCEN’s fact sheet on the proposed rule can be found here.
Citations
S. Department of the Treasury, Financial Crimes Enforcement Network. FinCEN Proposes Rule to Fundamentally Reform Financial Institution Programs. April 7, 2026.