Banks must now prove their anti-money laundering programs actually stop money laundering
The Treasury is admitting that decades of mandatory anti-money laundering compliance did not require anyone to actually stop money laundering.
What happened
The US Treasury is proposing new rules that will require financial institutions to demonstrate their anti-money laundering programs are effective, not just in place. This means banks will have to show their systems actually catch illicit finance, and regulators will play a bigger role in checking their work.
Why it matters
Banks spent billions making sure their anti-money laundering paperwork was perfect while the actual money kept laundering. This rule finally asks them to prove their systems catch criminals, not just typos. The era of the compliance checklist is over.
The signal
Regional banks will be forced to buy expensive AI monitoring systems or merge, as the cost of proving effectiveness outpaces the cost of mere compliance.
Banks are now required by the Treasury Department to prove their anti-money laundering programs actually work. Previously, it was entirely acceptable for them to not work at all.