Fed and FinCEN Propose New AML Standards Under GENIUS Act

The Federal Reserve and four other federal agencies have launched a 60-day public comment period on a proposed rule to implement the GENIUS Act. The proposal requires financial institutions to verify customer identities, maintain detailed records, and screen individuals against government terrorist lists to combat money laundering, according to the rule proposal.

The joint effort includes the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the National Credit Union Administration, and the Treasury Department’s financial-crimes arm. These agencies are seeking feedback on a “notice of proposed rulemaking.”

What are the new identity verification requirements?

Under the proposal, financial institutions must establish reasonable procedures to verify the identity of any person seeking to open an account, provided it is reasonable and practicable. According to the text, these procedures must include maintaining records of the information used for verification, specifically names, addresses, and other identifying data.

Institutions are also required to determine if a person appears on lists of known or suspected terrorists or terrorist organizations. These lists are provided to the financial institutions by government agencies.

Did You Know? In September, regulators issued a preliminary document seeking comments on the GENIUS implementation, which resulted in 450 comments sent to the Treasury.

How does the rulemaking process work?

The current stage is a formal notice of proposed rulemaking. This follows an earlier preliminary phase and involves a secondary comment period and review process. This sequence is required before the agencies can issue final joint rules and begin enforcing the regulations.

Separately, the Treasury’s Financial Crimes Enforcement Network (FinCEN) is pursuing its own related rule. This specific action aims to apply the GENIUS Act anti-money laundering provisions to issuers.

Expert Insight: Samantha Carter notes that the transition from a preliminary document to a formal notice of proposed rulemaking indicates a tightening of the regulatory framework. The shift toward joint enforcement across five different agencies suggests a coordinated effort to standardize anti-money laundering compliance across the entire financial sector.

What happens next for financial institutions?

Following the 60-day comment period, the agencies may review the feedback to refine the proposed rules. A possible next step is the issuance of final joint rules, which would trigger the start of official enforcement.

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Financial institutions could face new operational requirements for account opening and record-keeping once these rules are finalized. The separate FinCEN rule may specifically alter how issuers manage anti-money laundering obligations.

Frequently Asked Questions

Which agencies are participating in this joint effort?
The effort includes the Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the National Credit Union Administration, and the Treasury Department’s financial-crimes arm.

What specific information must be recorded during identity verification?
Institutions must maintain records of the information used to verify identity, including the person’s name, address, and other identifying information.

How long is the current public comment period?
The Federal Reserve and participating agencies have opened a 60-day public comment period.

How might these identity verification requirements impact the speed of opening new financial accounts?