Federal Reserve Proposes Risk-Based AML Rule For Banks

The Federal Reserve Board is asking for comment on a bank anti-money laundering proposal that would move its supervised institutions towards a more risk-based compliance test.

In an official July 7 release, the Federal Reserve Board said banks would have to focus anti-money laundering resources on higher-risk customers and activities, while comments on the proposal would be due 60 days after publication in the Federal Register.

The proposal is aimed at anti-money laundering and countering the financing of terrorism programs, often shortened to AML/CFT.

In plain terms, the rule would govern how Federal Reserve-supervised banks identify illicit-finance risks, assess those risks and maintain compliance programs designed to produce useful information for law-enforcement and national-security agencies.

The Federal Reserve Board said the amendments would also require banks to incorporate Financial Crimes Enforcement Network priorities into their risk assessment processes.

Once a bank has established an AML program, the central bank said its supervision and enforcement would focus on significant failures to implement that program.

This account comes from the Federal Reserve Board's own official notice, so the rule description remains official agency language rather than independent bank implementation evidence.

The notice does not include bank-level implementation data.

FinCEN Priorities Would Enter Bank Risk Assessments

The official notice frames the proposal as an alignment exercise across US banking supervisors rather than a standalone Federal Reserve rule.

The Federal Reserve Board said the amendments are intended to match changes proposed separately by FinCEN, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the National Credit Union Administration.

The Federal Reserve notice identifies the Anti-Money Laundering Act as the statutory background for the proposed program changes.

The notice states that the law directed FinCEN to establish national AML/CFT priorities and to review those priorities at least once every four years.

The Federal Reserve proposal would bring that priorities-based approach into the program requirements for banks supervised by the Board.

The proposal would also define a bank AML/CFT program as one designed to identify, assess and mitigate illicit-finance risk.

The Federal Reserve notice says those risks include money laundering, terrorist financing and other illicit finance.

The notice also says the program should help authorities obtain information about illicit transactions for law-enforcement and national-security work.

The draft language keeps the focus on each bank's own risk profile rather than a uniform checklist.

The notice says the program would need to be reasonably designed to assure and monitor compliance with Bank Secrecy Act requirements, while also accounting for the bank's activities and customer base.

Banks Would Still Need Written Programs And Board Oversight

The proposal does not remove the basic requirement for formal compliance controls.

The Federal Register notice states that banks would still need written AML/CFT programs, internal policies, procedures and controls, independent testing, a designated compliance officer and ongoing employee training.

The notice also says the program would need to be approved and overseen by a bank's board of directors or by an equivalent governing body.

The Federal Reserve proposal would require a qualified compliance officer to be designated, though the notice says the wording would replace older references to a Bank Secrecy Act compliance officer.

The agency also describes a more explicit risk assessment.

The Federal Reserve notice says banks would need to account for their business activities, products, services, distribution channels, customers, intermediaries and geographic locations.

It also says banks would have to use reports filed by the bank, its affiliates and subsidiaries under the Bank Secrecy Act as part of the risk assessment.

Comment Period Leaves Implementation Details Open

The proposal is still at the comment stage.

The official notice gives the docket and regulatory identifier for submissions.

The immediate change is not a final new operating deadline for banks or compliance technology providers.

The proposed regulatory language could make risk assessment, FinCEN priority mapping and program implementation failures more central to examination outcomes if the rule is finalised.

The Federal Reserve Board did not include a final effective date, a bank implementation deadline, examination thresholds, technology requirements, or examples of enforcement treatment for specific AML/CFT program failures.