The US Federal Reserve has proposed sweeping new anti-money laundering (AML) rules that would require supervised banks to adopt risk-based compliance programs, marking a significant shift in how the central bank oversees illicit finance controls across the American banking sector.
Proposal Overview and Regulatory Context
On July 7, 2026, the Board of Governors of the Federal Reserve System issued a Notice of Proposed Rulemaking (NPRM) that would require Board-supervised banks to establish and maintain effective, risk-based AML and countering the financing of terrorism (CFT) programs. The proposal is designed to align the Federal Reserve’s requirements with those of the Financial Crimes Enforcement Network (FinCEN) and other federal banking agencies, implementing key provisions of the Anti-Money Laundering Act of 2020 (AML Act).
Unlike the joint NPRM issued on April 10 by the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA), the Federal Reserve is issuing its own separate proposed rule. The Fed’s proposal would apply to 858 Board-supervised institutions, including state member banks, “Edge and agreement” corporations, and certain branches and agencies of foreign banks operating in the United States.
Key Requirements Under the Proposed Rule
The proposed rule introduces several major changes to existing AML/CFT program requirements:
- Risk Assessment Processes: Banks would be required to develop risk assessment processes that incorporate FinCEN’s national AML/CFT Priorities and direct more attention and resources toward higher-risk customers and activities.
- Customer Due Diligence: The proposal adds customer due diligence as an express component of the Board’s AML/CFT program rule, aligning with FinCEN’s existing requirements.
- AML/CFT Officer Location: The designated AML/CFT officer must be located in the US and accessible to regulators, consistent with a new requirement under the AML Act.
- Program Approval Options: The rule expands approval options for a bank’s written AML/CFT program to include the board of directors, an equivalent governing body, or appropriate senior management.
- Two-Pronged Enforcement Framework: The proposal establishes a supervision and enforcement framework distinguishing between program “establishment” and program “maintenance,” under which significant supervisory or enforcement actions for implementation deficiencies would be limited to “significant or systemic” failures.
Emphasis on Innovation and Technology
The NPRM explicitly encourages banks to evaluate innovative compliance approaches, including machine learning, generative artificial intelligence, digital identity tools, and blockchain analytics. This represents a notable regulatory shift toward embracing technological solutions in the fight against financial crime, acknowledging that traditional compliance methods may be insufficient against increasingly sophisticated illicit finance schemes.
Enforcement and Supervision Changes
American Banker reported that the Federal Reserve proposal calls for banks to make their compliance programs “risk-based” and pledges to emphasize “systemic” flaws rather than minor technical violations. This approach signals a more pragmatic enforcement posture that focuses on material weaknesses in AML programs rather than penalizing institutions for isolated compliance gaps that do not pose significant illicit finance risks.
The two-pronged framework distinguishes between failures to establish adequate programs versus failures to maintain them effectively, with the Fed indicating that significant supervisory or enforcement actions would be reserved for “significant or systemic” failures.
Industry Reaction and Commentary
The STEP (Society of Trust and Estate Practitioners) noted that the proposed rule requires supervised banks to develop and establish risk assessment processes directing more resources toward higher-risk customers and activities. Legal observers have characterized the proposal as part of a broader regulatory overhaul aimed at modernizing AML/CFT requirements across the US financial system.
The National Law Review highlighted that the Federal Reserve Board requested comment on the proposed rule that would amend the anti-money laundering and countering the financing of terrorism program requirements.
Timeline and Comment Period
The proposed effective date is 12 months from issuance of the final rule, giving supervised institutions substantial time to adjust their compliance programs once the rule is finalized. Comments on the proposal must be submitted by September 8, 2026, providing a approximately two-month window for industry stakeholders, consumer advocates, and other interested parties to provide feedback on the proposed changes.
Broader Regulatory Landscape
The Federal Reserve’s proposal comes amid a coordinated interagency effort to overhaul AML/CFT requirements. The FDIC, OCC, and NCUA jointly proposed similar risk-based AML/CFT rewrite requirements for banks and credit unions in July 2026. FinCEN has also been working on parallel amendments to existing program rules to explicitly require financial institutions to establish, implement, and maintain effective, risk-based, and reasonably designed AML/CFT programs.
This coordinated regulatory push reflects the implementation timeline established under the AML Act of 2020, which mandated comprehensive reforms to strengthen the US anti-money laundering framework and enhance coordination among federal financial regulators.