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FinCEN Seeks Comments on Effectiveness of AML Programs, Presenting Rare Opportunity for FinTech and Blockchain Companies

By Alan Cohn, Brian Egan & Evan Abrams
September 22, 2020
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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.

Photo of Alan Cohn Alan Cohn
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Photo of Brian Egan Brian Egan

Brian Egan advises on a number of international legal issues that affect US and foreign clients, including economic sanctions, export controls, and anti-money laundering programs; national security trade and investment reviews; international arbitration and other cross-border disputes; international cybersecurity and data privacy; and…

Brian Egan advises on a number of international legal issues that affect US and foreign clients, including economic sanctions, export controls, and anti-money laundering programs; national security trade and investment reviews; international arbitration and other cross-border disputes; international cybersecurity and data privacy; and issues of public international law. He has worked in various senior legal positions for the US government, giving him keen insight into domestic and international legal matters that influence US government national security and foreign relations policies and programs. Before joining Steptoe, Brian served as the Legal Adviser to the US Department of State, the Legal Adviser to the National Security Council, Deputy White House Counsel, and Assistant General Counsel for Enforcement and Intelligence with the US Department of the Treasury. Brian has regularly appeared in public fora to speak on international legal issues, including testifying before Congress, public speaking engagements, and panel presentations.

Read Brian’s full bio.

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Photo of Evan Abrams Evan Abrams

Evan Abrams counsels multinational corporations, financial institutions, and individuals on various international regulatory and compliance matters. He assists foreign and domestic companies in navigating national security reviews by the Committee on Foreign Investment in the United States (CFIUS). He has represented companies in…

Evan Abrams counsels multinational corporations, financial institutions, and individuals on various international regulatory and compliance matters. He assists foreign and domestic companies in navigating national security reviews by the Committee on Foreign Investment in the United States (CFIUS). He has represented companies in industries including semiconductors, metals, and digital security. Evan’s anti-money laundering (AML) practice focuses on helping financial institutions comply with federal and state AML rules, particularly money transmitters and entities involved in creating, exchanging, or dealing in cryptocurrencies and tokens. Evan counsels clients in a variety of export controls and sanctions matters related to the Export Administration Regulations (EAR), International Traffic in Arms Regulations (ITAR), and various sanctions programs under US and international law. In addition, Evan routinely assists clients on anti-corruption investigations and enforcement actions.

Read Evan’s full bio.

Read more about Evan AbramsEmail
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  • Posted in:
    Technology
  • Blog:
    Blockchain Blog
  • Organization:
    Steptoe & Johnson LLP
  • Article: View Original Source

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