Federal ReserveProposed Rule (NPRM)medium

Board-supervised banks (state member banks, Edge and agreement corporations, foreign bank branches/agencies)

On Jul 7, 2026, the Federal Reserve proposed a rule requiring Board-supervised banks to establish and maintain effective, risk-based AML/CFT programs designed to identify, assess, and mitigate illicit finance risks under the BSA. The proposal applies to 858 institutions, including state member banks, Edge and agreement corporations, and certain branches and agencies of foreign banks. The Fed issued its own NPRM rather than joining the joint proposal released on Apr 10, 2026, by the OCC, FDIC, and NCUA.

S. The rule also establishes a two-pronged supervision framework that limits enforcement actions for implementation deficiencies to "significant or systemic" failures. Comments are due by Sep 8, 2026.

Implications
  1. BaaS and sponsor banks must ensure third-party AML/KYC arrangements meet heightened risk-based program standards
  2. Fintech partners providing AML/KYC services face increased scrutiny and due diligence requirements from bank partners
  3. Banks relying on third-party AI-based AML monitoring must demonstrate explainability and auditability of decisions
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