Trump’s Treasury Seeks Overhaul of Current Anti-Money-Laundering Oversight
In a significant shift towards potential deregulation, last week the U.S. Treasury Department under Secretary Scott Bessent issued a draft term sheet which was circulated to financial regulators across the country, proposing a potentially major overhaul of current anti-money-laundering (AML) enforcement protocols. The proposed plan leans towards the Treasury taking a more central role in the oversight of AML and counter-terrorism financing (CFT) rules, and could grant their Financial Crimes Enforcement Network (FinCEN) new and unprecedented capabilities. These powers would specifically encompass the regulator both overseeing and making final rulings on actions taken by other banking regulators with regards to U.S. Bank Secrecy Act (BSA) enforcement.
Under the proposal, FinCEN – the bureau within the Treasury Department that collects and analyzes information about financial transactions to combat domestic and international money laundering, terrorist financing, and other financial crimes – would be given the authority to formally review and potentially veto enforcement actions related to the current BSA, which remains the foundational law requiring American banks to monitor and report suspicious transactions for purposes of financial crime mitigation. If finalized, it could also allow banks in some cases to avoid being penalized by regulators for what the Treasury views as mere technical violations of their anti-money-laundering systems.2
Money laundering in the U.S. today remains a pervasive and evolving problem. Analysts estimate the total scope of these nefarious activities – which now emerge through a number of increasingly-advanced avenues (including real estate, crypto, and the misuse of shell companies) – eclipses several hundred billion dollars collectively in the United States alone on an annual basis. In spite of increasing regulation and oversight coming about over the last two decades, the issue continues to grow in scope both domestically and abroad. These activities, ranging anywhere from small scale operations to cross-border exploits, ultimately enable the destabilizing activities of entire criminal enterprises and terrorist groups to continue, while threatening U.S. national security interests in the process.
The Trump administration and Treasury Secretary Scott Bessent commenced the push towards reducing stringency in banking regulation at the start of the President’s current term under the sentiment that current restrictions may be inhibiting economic growth. Earlier this year, the Treasury announced it would be reducing enforcement of penalties under portions of the Corporate Transparency Act – a measure which requires beneficial ownership disclosure – against many domestic entities, and proposed narrowing the rule to apply mainly to foreign companies to reduce the burden placed on U.S.-based businesses and legal entities covered by the legislation. This announcement came shortly after FinCEN postponed the effective date of their long-awaited ”final rule” for investment advisers (which would have added certain registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to the definition of “financial institution” under Bank Secrecy Act regulations and forced them to comply with minimum AML/CFT standards and suspicious activity reporting requirements) from January 1, 2026 to January 1, 2028. The regulator also signaled that the measure would be revisited during this delay and potentially altered to reduce the scope of compliance obligations for these entities before finalizing a new rule.1
As such, this latest potential move addresses complaints from the banking industry that current AML safeguards are not proactive enough to stop illicit financial activity before it occurs. Banking representatives at top institutions across the country have argued that regulators have focused too heavily on procedural compliance rather than substantive risks, leading to excessive reporting and undue resource allocation with no substantial returns to show for it. Complaints that current AML/CFT requirements are too costly for firms both large and small also remain prevalent, while others have found the rules by which they are bound to be overly rigid, thus rendering them ineffective at thwarting major criminal activity without needing significant follow-up from international law enforcement bodies.
In October 2025, Secretary Bessent compounded the need for this modernized approach to stopping illicit financial activity, stating that FinCEN and bank regulators were cooperating to actively develop new rules for more “effective” AML programs. The impending overhaul builds on the Anti-Money Laundering Act of 2020, which called for modernizing the BSA framework to be more risk-based. If enacted, it would allow financial institutions to de-prioritize lower-risk activities and focus resources on high-priority threats, such as national security risks and large-scale illicit finance. The latest proposal also aligns with broader administration efforts, including reforms to the Financial Stability Oversight Council (FSOC) to prioritize growth over additional regulatory layers. All told, these efforts are part of a growing push to tailor current regulations for the benefit of all parties involved, particularly benefiting community banks, while encouraging innovation across the financial services sector as a whole.
Thus far proponents of these changes, including major banking groups, have welcomed the potential to streamline compliance without compromising core objectives. Critics however have raised concerns about the potential weakening of current safeguards that would open the floodgates to increased criminal activity. Time will tell the effects that such a shift could play on the future of regulatory compliance. At current however, the draft remains under discussion amongst the aforementioned regulators with no final rules announced, though if enacted, these changes could mark a pivotal recalibration of how the U.S. combats money laundering in the modern financial landscape.
Citations
- Financial Crimes Enforcement Network.Fact Sheet: FinCEN Issues Final Rule to Combat Illicit Finance and National Security Threats in the Investment Adviser Sector. U.S. Department of the Treasury, 28 Aug. 2024.
- Tokar, Dylan. “Treasury’s Bank Regulation Takeover Has a New Goal: Anti-Money-Laundering Rules.”The Wall Street Journal, 10 Dec. 2025