August 29, 2016

FinCEN Proposal Extends AML Requirements to Banks Without a Federal Functional Regulator

Proposed Rule Would Include Trust Companies and Puerto Rican IBEs
Holland & Knight Alert
Andres Fernandez | Gabriel Caballero Jr.

The Financial Crimes Enforcement Network (FinCEN) on Aug. 25, 2016, issued a notice of proposed rulemaking (Proposed Rule) to implement Section 326 of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001. The Proposed Rule would remove the anti-money laundering (AML) program exemption for banks (and certain financial institutions considered banks under the Bank Secrecy Act) that lack a federal functional regulator, including but not limited to:

  • state-chartered nondepository trust companies
  • non-federally insured credit unions, state banks and savings associations
  • certain private banks
  • international banking entities, or ''entidades bancarias internacionales'' (IBEs), that are not federally insured but are authorized by Puerto Rico and the U.S. Virgin Islands to provide banking and other services to nonresident aliens

Among other things, the Proposed Rule would prescribe minimum standards for anti-money laundering programs for banks without a federal functional regulator to ensure that all banks, regardless of whether they are subject to federal regulation and oversight, are required to establish and implement anti-money laundering programs, and would extend customer identification program requirements and beneficial ownership requirements to those banks not already subject to these requirements.

Considerations for Financial Institutions

The Proposed Rule is expected to shake up the trust and financial services industries and impact international banking entities that do business in Puerto Rico and the U.S. Virgin Islands. In light of the foregoing, many financial institutions that are not currently supervised by a federal functional regulator will need to review, revise and enhance their existing anti-money laundering policies and procedures – as well as the existing capabilities of their systems and monitoring controls – to address the requirements imposed by the Proposed Rule.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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