- Key Insight: The Federal Deposit Insurance Corp. would need to inform the Treasury's Financial Crimes Enforcement Network a month before it issues anti-money laundering and countering the financing of terrorism enforcement actions against stablecoin issuers under the proposal.
- Expert Quote: "To facilitate that review, the FDIC would be required to provide written notice to the Finance Director of the FDIC's intent to take the action at least 30 days in advance of the proposed action, unless a shorter period is necessary, at the sole discretion of the FDIC, to remedy, prevent, or respond to an unsafe or unsound practice or condition." — FDIC proposal
- Forward look: The proposed standards entrench the Treasury's expanding role in bank regulation under the second Trump term.
The Federal Deposit Insurance Corp. on Friday
The 30-page proposal largely incorporates Treasury's separate April proposal establishing AML and sanctions standards for stablecoin issuers, while adding a new consultation process that would require the FDIC to notify Treasury's Financial Crimes Enforcement Network at least 30 days before pursuing major anti-money laundering and countering the financing of terrorism enforcement or supervisory actions against an issuer.
"Under such a consultation framework, before initiating such actions, the FDIC would provide the Director of Fincen with an opportunity to review the proposed action and would consider any input offered by the Director of Fincen, which may include any view as to the effectiveness of the [issuer]'s [anti-money laundering] program," the proposal notes. "To facilitate that review, the FDIC would be required to provide written notice to the Fincen Director of the FDIC's intent to take the action at least 30 days in advance of the proposed action, unless a shorter period is necessary, at the sole discretion of the FDIC, to remedy, prevent, or respond to an unsafe or unsound practice or condition."
The proposed rule comes after the Treasury Department's Financial Crimes Enforcement Network in April issued its own anti-money laundering and countering the financing of terrorism
Using its own discretion, the FDIC could shorten the timeline if immediate action is necessary to address unsafe or unsound conditions. Covered enforcement actions that would require preclearance would include cease-and-desist orders, written agreements, consent orders, memoranda of understanding, civil money penalties, and all formal supervisory determinations that point out AML weaknesses and require issuers to remediate shortcomings.
Informal observations and comments by examiners are explicitly excluded from the definition and would not trigger the requirement to consult the Treasury.
In addition to preclearance, the proposal sets a high bar for anti-money laundering enforcement actions. Except for cases of gross negligence, stablecoin issuers would generally be protected from a number of enforcement actions as long as they have implemented what is deemed an appropriate AML program. This "is not intended to affect criminal enforcement liability under the [Bank Secrecy Act]," according to the FDIC.
The proposal also provides stablecoin issuers flexibility with regard to information sharing. Issuers could share otherwise confidential supervisory information directly with Fincen whenever the FDIC seeks supervisory preclearance.
"This proposed rule specifically provides that this authorization to share information
includes information that would ordinarily be considered non-public information under
the FDIC's rules," the proposal indicates. "To qualify for this information sharing, the information at issue must have an appropriate nexus to an existing or potential [anti-money laundering and countering the financing of terrorism] enforcement action or significant [anti-money laundering and countering the financing of terrorism] supervisory action."
