FinCEN Proposes Expanded Requirements for AML/CFT Programs

FinCEN proposed amending existing regulations to explicitly "require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs with certain minimum components, including a mandatory risk assessment process." 

Under the proposal, the mandatory risk assessment process must identify, evaluate and document the financial institution's risks, including consideration of: (i) FinCEN's government-wide AML/CFT priorities; (ii) the money laundering and terrorist financing (ML/TF) risks of the financial institution, based on a periodic evaluation of its business activities, including products, services, channels, customers, intermediaries and geographic locations; and (iii) required reports filed by financial institutions. Financial institutions affected by this proposal include: banks, casinos, money services businesses, broker-dealers, mutual funds, insurance companies, futures commission merchants and introducing brokers in commodities, dealers in precious metals, operators of credit card systems, loan or finance companies and housing government sponsored enterprises.

These financial institutions would be expected to use the results of their risk assessment process to develop risk-based internal policies, procedures and controls. The proposed rule also requires financial institutions to periodically review and update the risk assessment process including, at a minimum, when there are material changes to their ML/TF risks.

Comments on the proposed rule are due within 60 days after the date the proposed rule is published in the Federal Register.