The regulations are looking to combat emerging threats posed by illicit activities and may affect crypto firms and exchanges
The United States Financial Crimes Enforcement Network (FinCEN) has released an announcement which states that laws regulating Anti Money Laundering (AML) and Counter Terror Financing (CFT) will be changing within the financial sector.
The 24-page document, released today, speaks of potential regulatory amendments to ensure an “effective and reasonably designed” anti-money laundering program.
The announcement stated that FinCEN is seeking public commentary on the regulatory proposals intended to modernize and strengthen rules governing the reporting and monitoring requirements of financial institutions. It added that the amendments are aimed at assessing and managing risk as reported by a financial institution’s risk assessment in consideration with the anti-money laundering priorities to be issued by FinCEN.
The new policies might affect crypto firms and exchanges at large as the announcement clearly mentions “the evolving threats of illicit finance, such as money laundering, terrorist financing, and related crimes” as one of the prime reasons for the proposed changes. Banks, credit unions, casinos, insurance companies, mutual funds, and dealers or brokers of futures, commodities, precious stones, and precious metals will also be affected.
Though risk assessment is key to ensuring an effective AML program, it is not an explicit requirement under the current set-up for all financial institutions, the announcement said.
Thus, the proposed changes would involve the establishment of a risk-assessment process that includes the identification and analysis of money laundering, terrorist financing, and other illicit financial activity risks faced by the financial institution based on an evaluation of various factors.
The factors include “its business activities, products, services, customers, and geographic locations in which the financial institution does business or services, customers,” the announcement stated.
FinCEN explains that the new AML regulation will identify and combat illicit activity by indulging in robust record-keeping along with the risk assessment requirements. It further hopes to tighten the definition and requirements of an “effective and reasonably designed” AML program under the Bank Secrecy Act (BSA). FinCEN added that the term currently has” no specific, consistent definition in existing regulation.”
“The regulatory amendments under consideration are intended to modernize the regulatory regime to address the evolving threats of illicit finance, and provide financial institutions with greater flexibility in the allocation of resources, resulting in the enhanced effectiveness and efficiency of anti-money laundering programs,” the announcement explained.
The regulatory body is considering policy recommendations from the Anti-Money-Laundering Effectiveness Working Group — an entity comprising representatives of state and federal law enforcement agencies, financial institutions, and trade groups operating under BSA regulations.