On 16 September 2020, FinCEN issued an Advanced Notice of Proposed Rule-making (“ANPRM”) to “solicit public comment on a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (“BSA”) of 1970. In the ANPRM, FinCEN acknowledges that the U.S. AML regimes needs to adapt to address the evolving threats of illicit finance while providing financial institutions with the flexibility to addressing these threats. 

It is reported that FinCEN in collaboration with other industry players, regulatory bodies, law enforcement and trade groups, have undertaken initiatives to review the existing U.S. laws for the aim of developing a strategy to upgrade and update. Upgrading and updating would include, but not be limited to, the impact and relevance of new technologies, information sharing, and recently developed approaches to risk-based compliance practices.

Over the past couple years, government officials have been working together on recommendations for change in the AML/BSA landscape. Notably, the recommendations include:

  • Developing and focusing on AML priorities;
  • Reallocation of compliance resources;
  • Monitoring and reporting;
  • Enhancing information sharing; and
  • Advancing regulatory innovations.

Additionally, FinCEN – through this ANPRM – seeks comments on “whether it is appropriate to clearly define [the] requirement[s] for an ‘effective and reasonably designed’ AML program [under] BSA regulations.

It appears from the ANPRM that FinCEN and the collaborators view increasing “effectiveness” of the national AML regime to be a core objective of recent AML modernization effects.  As part of defining an “effective and reasonably designed” AML program, FinCEN is considering regulatory amendments that would further define the applicable criteria (under the definition):

  • Identify, assess, and reasonably mitigate financial crime related risks in accordance with their risk profile and regulator communicated AML priorities;
  • Assure and monitor company with recordkeeping and reporting requirements of the BSA; and
  • Adhere to information sharing practices to government authorities in a risk-based manner.

While many of these measures may seem redundant to recently issued guidance from U.S. regulators or changes reflected in the FFIEC Examiners manual – they are practices that are largely consisted with formal regulation issued in other parts of the world (i.e. EU).  Measures that are otherwise communicated and encouraged by international groups like the FATF.  

As one of the world’s largest economies, it is about time that our government officials formally update our laws and regulations to reflect these best practices for combating illicit finance. Furthermore, as many U.S. financial institutions have already adopted much of these risk-based best practices and other such guidance, their formal introduction and adoption into U.S. law may not result in a serious financial blow to the industry players. 

But – if that is not the case, the industry is met with challenges to compliance, perhaps the U.S. financial industry can take pride in the possibility this change may help the U.S. improve their reputation as a financial secrecy hotbed.