By Walt Williams
President Trump took office in January with the promise of pursuing a deregulatory agenda while also pledging to take a tough stance on drug trafficking and hostile foreign actors such as Iran. That has led to a shift in government priorities in terms of anti-money laundering and Bank Secrecy Act policy and enforcement, although the fundamentals remain the same.
“We’re protecting the U.S. financial system. We’re trying to stop bad actors,” says ABA SVP and Senior Counsel Heather Trew, who spoke to bankers on AML/BSA changes at the ABA Risk and Compliance Conference in June. “We’re trying to make US foreign policy effective — without banks and financial institutions, U.S. foreign policy tools just wouldn’t work. We’re also protecting national security, but most importantly, we’re protecting your customers.”
Suspicious activities
There has been a noticeable shift in what banks are expected to monitor under Trump. For example, disrupting the illegal fentanyl trade is a major priority for the administration. The Financial Crimes Enforcement Network in April issued an analysis identifying $1.4 billion in suspicious activity reported through BSA filings that were related to fentanyl trafficking. Only 25 suspicious activity reports, or SARs, accounted for 42 percent of that total, or $588 million, according to Trew.
“Those particular SARs also involve trade-based money laundering,” she says. “That seems like an important thing to look for, especially if you know what the trade is.” Eighty percent of fentanyl-related SARs also involved electronic fund transfers, Trew says. A little over half involved cash, while only one in 10 involved cryptocurrency. (In late June, shortly before this issue went to press, FinCEN issued its first orders targeting overseas financial institutions using new authorities granted by the 2024 FEND Off Fentanyl Act.)
Iran is another top priority for the administration. FinCEN issued an advisory in June to assist financial institutions in identifying, preventing and reporting suspicious activity connected to Iranian illicit financial activity, including oil smuggling, “shadow banking” and weapons procurement. “One of the things I noticed in that advisory is a lot of the focus not just your customer, but your customers’ customers,” Trew says.
Fraud remains a top focus for regulators. FinCEN in May used its Section 311 authority under the Patriot Act to label the Cambodia-based Huione Group as a financial institution of primary money laundering concern and has proposed to sever its access to the U.S. financial system.
“FinCEN has signaled that they plan to impose the fifth special measure (under the Patriot Act), which means no correspondent banking relationships, so more to come on that,” Trew says. “But it seems very clear that the administration is using FinCEN’s tools in addition to OFAC [Office of Foreign Assets Control] sanctions to provide these objectives.”
Recordkeeping
A major change in 2025 is a new OFAC rule extending recordkeeping requirements for certain transactions from five to 10 years to make them consistent with the recently expanded statute of limitations for sanctions violations. This is a new mandate for many banks, as they must now hold onto records for 10 years exclusively for the purpose of complying with sanctions requirements, according to Trew.
“FinCEN has signaled that they plan to impose the fifth special measure (under the Patriot Act), which means no correspondent banking relationships.”
“The rule is broad,” Trew says. “It says you keep records related to transactions that are ‘subject to this chapter.’ What is that? OFAC has been strategically ambiguous about things. Sometimes they don’t like to get in the weeds and define stuff because they really want you to comply. Sometimes they want you to over-comply. They want you to say ‘if something’s on the fence, maybe I just shouldn’t do it because overall it’s too risky’.”
ABA has submitted a request to OFAC for guidance on compliance with the rule and made recommendations to clarify what records OFAC will generally expect banks to keep, and what they will generally not be expected to retain, although the final decision will remain up to each bank. The association suggested that OFAC clarify any records of transactions that require a license fall under the 10-year rule. It also recommended that banks be required to hold onto records for transactions involving a valid match of a party on OFAC’s sanctions list.
Beneficial ownership reporting
One of the more substantial compliance policy rollbacks is a proposal by the administration to remove the requirement for U.S.-based companies and persons to report beneficial ownership information, or BOI, to the agency under the Corporate Transparency Act. Suddenly, 33 million companies no longer had to report their BOI to FinCEN, Trew says. That leaves about 12,000 foreign-owned companies that still must report BOI, and even that is up in question.
“There was a good question about whether courts would find Treasury’s original reporting rule to be lawful,” Trew says. “There’s still litigation pending.”
The reversal on BOI also leaves a question mark hanging over reform of the broader customer due diligence rule. “FinCEN is directed to revise the CDD rule” under the Corporate Transparency Act, Trew says. “Clearly the revision isn’t going to be quite the same if there isn’t a pool of data of all of these businesses that’s resident within FinCEN.”
Still, ABA views CDD reform as critical. “The most critical part is let’s do this at the customer level,” Trew says.
“FinCEN didn’t realize that banks open between 140-160 million accounts every year, so it wasn’t a huge deal to them they were putting this new burden on you with new account openings. Well, they get it now — we helped educate them on that and hopefully that will give them some grist for the mill to say ‘We will not make this CDD rule contingent upon doing things at the account level’.”
