As the world ramps up efforts to detect and deter terrorist financing in the wake of tragedies in San Bernadino and Paris, one of our most effective mechanisms for fighting money-laundering and other financial crimes may well be endangered as a result of regulation being considered in the name of consumer protection.

The Consumer Financial Protection Bureau's proposal to regulate payday and other small lenders — which has yet to be formally released after being reviewed by a small-business advisory panel — could threaten thousands of companies that assist regulators in bringing laundering risks out into the light.

The proposal would apply to many lenders also licensed as money services businesses — the institutions on the front lines in fighting money laundering and terrorist financing. Through the suspicious-activity reports and currency transaction reports they file regularly, MSBs serve to bring financial transactions onto the regulatory radar screen. Without these institutions, certain transactions would be conducted without detection and law enforcement scrutiny.

MSBs tend to be multi-line businesses, providing an array of financial services. Those that offer payday and other small loans are put at risk by a CFPB proposal that, despite good intentions, would eliminate between 60% and 75% of loan revenues by the consumer bureau's own estimates.

Over the past two years, MSBs have also faced threats to their existence as a result of Operation Choke Point, a U.S. Department of Justice program that attempted to control fraud by cutting off MSBs' access to the banking system. Rather quickly, it became apparent that banks — afraid of regulatory actions — were eliminating access even to MSBs without any law enforcement concerns. Luckily, federal regulators, including the Federal Deposit Insurance Corp., have taken steps to mitigate the overreach, removing a barrier to MSBs helping to thwart terrorist financing.

But even though the administration and the CFPB have said they want to ensure loan products are safe rather than eliminate payday lenders, their proposals to date unfortunately do much more and much worse. If regulators do not ensure that small loan products are sustainable and profitable, individuals seeking loans will be forced to look for unregulated and underground sources of credit. And those sources will grow to meet the demand.

The Financial Services Centers of America has urged the CFPB to slow down the rulemaking process to study the impact on businesses and consumers. Inadvertently eliminating MSBs would not only eliminate products and financial inclusion benefits, but also valuable and important law enforcement tools.

Edward D'Alessio is the executive director of the Financial Service Centers of America, a national trade association representing 5,000 state licensed neighborhood financial service center locations, and an attorney at the law firm of Hudson Cook LLP.