On September 16, 2020, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) published an advanced notice of proposed rulemaking (ANPRM) seeking comments on regulatory changes to enhance the effectiveness of anti-money laundering compliance programs of regulated financial institutions. As described in FinCEN’s press release, the ANPRM presents an opportunity for financial institutions to provide comments on “a wide range of questions pertaining to potential regulatory amendments under the Bank Secrecy Act (BSA).” While FinCEN has published a number of rules in recent years through formal notice and comment procedures, the rules have been fairly targeted to issues such as customer due diligence. FinCEN has also issued a number of guidance documents, including guidance applying FinCEN’s rules to certain entities in the blockchain industry, but did not accept public comments from industry at the time. Therefore, the publication of the ANPRM presents a relatively rare opportunity for regulated entities to be heard on a range of AML programmatic and compliance issues.
The ANPRM contains 11 specific questions related to topics including, among others:
- Defining the term “effective and reasonably designed” compliance program;
- An explicit requirement for covered financial institutions to have a risk assessment process; and
- FinCEN publishing a list of “Strategic Anti-Money Laundering Priorities” every two years.
In addition to these specific topics, question three of the ANPRM contains an opened-ended question asking, “Are the changes to the AML regulations under consideration in this ANPRM an appropriate mechanism to achieve the objective of increasing the effectiveness of AML programs? If not, what different or additional mechanisms should FinCEN consider?” The breadth of this question presents an opportunity for financial institutions to raise a variety of issues and concerns and request specific actions from FinCEN.
Of particular note for FinTech and blockchain companies, which frequently face unique compliance challenges given the novelty of their technology, is question four of the ANPRM, which asks whether FinCEN should consider “industry-specific issues” as part of its definition of an “effective and reasonably designed” compliance program. Question seven similarly asks, “should regulatory amendments to incorporate the requirement for an ‘effective and reasonably designed’ AML program be proposed for all financial institutions within each industry type, or should this requirement differ based on the size or operational complexity of these financial institutions, or some other factors?” These questions provide a good opportunity for FinTech and blockchain companies to advocate for industry-specific approaches to compliance programs that account for distinct risks as well as enhanced AML capabilities.
The ANPRM largely results from recommendations to improve AML regulations made by FinCEN’s main public-private advisory group, the Bank Secrecy Act Advisory Group (BSAAG). The BSAAG’s membership includes representatives from financial institutions, federal and state regulatory and law enforcement agencies, and trade groups whose members are subject to the requirements of the BSA and its regulations. FinCEN describes the ANPRM as “a result of FinCEN’s evaluation” of the BSAAG’s recommendations and “a step toward considering their implementation.”
Comments on the ANPRM are due by November 16, 2020. Steptoe is available to assist interested parties in preparing comments for submission.