In April, the Financial Crimes Enforcement Network (FinCEN) released a Notice of Proposed Rulemaking (NPRM) that signals a consequential shift in U.S. anti-money laundering and countering the financing of terrorism (AML/CFT) regulation. The proposal is explicitly intended to modernize the US AML/CFT regulatory and supervisory framework and to ultimately reduce unnecessary compliance burden while strengthening the system’s ability to combat illicit finance.
At its core, it reorients AML/CFT programs away from procedural box checking and toward effectiveness, enhancing institutions’ ability to identify, prevent, and disrupt real financial crime.
This reflects a broader recognition by the U.S. Department of Treasury and FinCEN that too often, success has been measured by the volume of policies, alerts, and reports produced rather than by the quality, timeliness and usefulness of intelligence delivered to law enforcement, and the real-world harm prevented as a result. As Treasury Secretary Scott Bessent noted, “success should not be defined by paperwork, but by stopping illicit finance threats.”
A clear shift from process to effectiveness
The proposed rule represents a clear shift from process to effectiveness by establishing a conceptual framework with an intentional focus on program effectiveness and outcomes. Rather than providing prescriptive definitions of what effectiveness means in practice, FinCEN distinguishes between how a program is established—its design, governance, risk assessment, and controls—and how it is maintained through day to day implementation. The rule requires programs to be ‘reasonably designed’ to address an institution’s specific risk profile while leaving financial institutions to define what measurable effectiveness actually looks like. Under the proposal, supervisory and enforcement focus would center on whether a program is appropriately designed, escalating only in cases of significant or systemic failures to maintain that program in practice.
This recalibration acknowledges that no AML/CFT program operates in a static environment and that isolated weaknesses should not overshadow a fundamentally sound, risk based framework. For risk leaders, this provides welcome clarity and predictability. For investigation teams, it creates space to spend less time managing low value activity and more time pursuing the risks that matter most.
Empowering risk based programs
A central theme running throughout the NPRM and FinCEN’s accompanying fact sheet is discretion. Financial institutions are explicitly empowered to direct more resources toward higher risk customers, products, geographies, and activities while reducing effort and friction in lower risk areas. This shift is core to FinCEN’s stated objective of reducing unnecessary compliance burden without weakening safeguards.
In practice, this reinforces a principle the industry has long supported: AML/CFT programs should reflect an institution’s unique risk profile, not a one size fits all checklist. By reinforcing that institutions themselves are best positioned to identify and evaluate their illicit finance risks, FinCEN is signaling trust in well governed, data driven compliance programs.
Just as importantly, the proposal provides examiners with a clear directive to evaluate outcomes and program effectiveness. Clarifications around independent testing and audit are designed to ensure that supervisors do not substitute their own preferences for an institution’s reasonable, risk based judgments.
Enabling modernization and innovation
An effective AML/CFT framework enables technologies that can better identify meaningful risk, reduce false positives, and identify higher quality, more actionable insights at scale.
When institutions are evaluated on outcomes rather than outputs, investments in machine learning, entity resolution, network analytics, and behavioral modeling become not just viable, but essential. These capabilities allow financial institutions to move beyond static rules and manual reviews and move towards dynamic, adaptive AML/CFT programs that evolve as threats, typologies, and criminal behaviors change. AI driven approaches can help connect complex networks, prioritize investigations, and deliver clearer intelligence to law enforcement.
Equally important, the NPRM helps address a perceived risk of adopting new approaches. By establishing regulatory protection for innovation and focusing enforcement on the most serious issues, FinCEN creates the regulatory space financial institutions need to modernize their AML/CFT capabilities.
A coordinated supervisory model
The proposal also elevates FinCEN’s role in AML/CFT supervision, particularly for banks. Federal banking regulators would be required to notify and consult with FinCEN before taking certain significant supervisory or enforcement actions related to AML/CFT programs.
This coordination aims to promote consistency, reduce fragmentation across supervisory bodies and better align oversight with Treasury’s stated focus on effectiveness and outcomes. For institutions operating across multiple regulators, this represents a meaningful important step toward clearer expectations and fewer conflicting signals.
Why this moment matters
The proposed rule implements key provisions of the Anti Money Laundering Act of 2020 and represents a cornerstone of Treasury’s broader effort to modernize the Bank Secrecy Act framework. Public comments are open through June 9, 2026, and the final details of the rule will be shaped through that process.
This is the industry’s moment to define what effectiveness means—not in terms of operational efficiency, but in terms of real-world impact against criminal networks.
Financial institutions that act now to strengthen their risk assessments, invest confidently in modern technologies such as AI, and align governance around measurable outcomes will be better positioned not only to comply, but to play a more powerful role in protecting the integrity of the financial system.
At Nasdaq Verafin, we believe data driven technology is essential to enable financial institutions to manage the growing scale and complexity of financial crime. We help institutions provide the high-quality, actionable intelligence that law enforcement needs to identify, investigate, and disrupt the criminal networks that threaten our financial system.
About the Author:
Cheryl Friedenbach
Associate Vice President, Product Strategy
As Associate Vice President of Product Strategy, Cheryl Friedenbach spearheads Nasdaq Verafin’s product direction, ensuring AML solutions align with regulatory expectations and financial crime challenges facing financial institutions. She brings over 20 years of experience from her tenure as BSA/AML Officer at First National Bank of Omaha, spanning AML, OFAC, and predicate crime investigations into fraud, human trafficking, and drug trafficking.
