The U.S. Treasury Department this week proposed new rules aiming to safeguard the financial system against abuse by criminals, terrorists, foreign adversaries, and other “bad actors.”
The 202-page proposal from Treasury’s Financial Crimes Enforcement Network (FinCEN) details the Trump administration’s plan for the first major overhaul of the nation’s anti-money-laundering (AML) regime in decades, as mandated by the Anti-Money Laundering Act of 2020.
At its core, the newly proposed rule would deprioritize the technical compliance that has characterized the anti-money laundering regulatory landscape and instead require financial institutions to establish and maintain risk-based strategies.
“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,” Treasury Secretary Scott Bessent said in announcing the proposed rule.
Why it matters: Law enforcement, policymakers and compliance professionals say the existing U.S. AML rules foster compliance systems that, in trying to meet the letter of the law, prioritize ineffective metrics and expend disproportionate resources on low-risk threats. That too often has discouraged the adoption of more advanced investigative tools.
Outside view: “This is an important and much-needed shift toward a focus on effectiveness … that opens the door to more dynamic approaches, including the use of artificial intelligence, to detect patterns and respond in real time,” said Ari Redbord, a former senior Treasury national security official who’s now the head of policy and government affairs at TRM Labs, a blockchain analytics firm.
The proposal also reinforces the need for financial institutions to understand risk holistically, Redbord said. “Institutions need to assess exposure across products, customers, channels, intermediaries, and geographies, and build programs that evolve as those risks change,” he said, adding, “The expectation is not a prescribed format but a system that is documented, adaptable, and demonstrably effective.”
What’s different: The topline principle of the Biden proposal—modernizing U.S. regulations by moving beyond box-checking—carries over to the Trump version.
But there are two key differences, said Scott Greytak, the deputy executive director for the U.S. office of Transparency International, who has read both proposals cover-to-cover.
One last thing: The AML Act of 2020 mandated two other overhauls meant to help regulators protect the financial system from fraud and national security threats:
The 202-page proposal from Treasury’s Financial Crimes Enforcement Network (FinCEN) details the Trump administration’s plan for the first major overhaul of the nation’s anti-money-laundering (AML) regime in decades, as mandated by the Anti-Money Laundering Act of 2020.
At its core, the newly proposed rule would deprioritize the technical compliance that has characterized the anti-money laundering regulatory landscape and instead require financial institutions to establish and maintain risk-based strategies.
“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,” Treasury Secretary Scott Bessent said in announcing the proposed rule.
Why it matters: Law enforcement, policymakers and compliance professionals say the existing U.S. AML rules foster compliance systems that, in trying to meet the letter of the law, prioritize ineffective metrics and expend disproportionate resources on low-risk threats. That too often has discouraged the adoption of more advanced investigative tools.
- “Examiners must move beyond narrow validation of name-matching against static lists, which adversaries have long since learned to evade,” former Treasury officials at Kharon wrote in a white paper last year that called for modernizing AML rules. “Every dollar wasted on low-value compliance tasks is a dollar not spent countering fentanyl traffickers, hostile non-state actors, or adversarial military powers.”
Outside view: “This is an important and much-needed shift toward a focus on effectiveness … that opens the door to more dynamic approaches, including the use of artificial intelligence, to detect patterns and respond in real time,” said Ari Redbord, a former senior Treasury national security official who’s now the head of policy and government affairs at TRM Labs, a blockchain analytics firm.
The proposal also reinforces the need for financial institutions to understand risk holistically, Redbord said. “Institutions need to assess exposure across products, customers, channels, intermediaries, and geographies, and build programs that evolve as those risks change,” he said, adding, “The expectation is not a prescribed format but a system that is documented, adaptable, and demonstrably effective.”
What’s next: Industry watchers and former regulators say it could take up to 24 months for a final rule to go into effect here, for a few (standard) reasons:
the 60-day public comment period that just began;
the need to incorporate those responses into FinCEN’s final rule;
and a 12-month period between publication of the final rule and its implementation.
What’s different: The topline principle of the Biden proposal—modernizing U.S. regulations by moving beyond box-checking—carries over to the Trump version.
But there are two key differences, said Scott Greytak, the deputy executive director for the U.S. office of Transparency International, who has read both proposals cover-to-cover.
- One major change is when serious regulatory consequences would kick in. “The 2024 version was, ‘You need to have this thing built out and robust at the outset,’ and this one is leaning more toward, ‘If the end result is that you have a pretty significant or systemic failure, that’s when FinCEN and the regulatory agencies may come after you,’” Greytak said.
- The other major change, he said, is the chief-gatekeeper role that the proposed rule would give FinCEN, requiring other regulators such as the Office of the Comptroller of the Currency to notify it when enforcing anti-money laundering breaches. Current rules allow regulators to act independently, but some critics have raised concerns that this could give presidential administrations veto power over enforcement that didn’t align with their particular political objectives. Proponents say that giving FinCEN this role can help streamline regulatory scrutiny focused on national security priorities.
One last thing: The AML Act of 2020 mandated two other overhauls meant to help regulators protect the financial system from fraud and national security threats:
- FinCEN last week unveiled a whistleblower program that rewards employees at financial institutions who tip off regulators to AML violations.
- The other was a corporate transparency initiative the Biden administration had implemented that required companies to disclose their owners. Last year, the Trump administration rolled it back.
