President Trump issued Executive Order 14181 (the “Order”) on May 19, 2026 titled Integrating Financial Technology Innovation into Regulatory Frameworks. The Order directs federal financial regulators to review and update regulations, guidance, and supervisory practices to support financial technology innovation and reduce barriers to entry for non‑bank fintech firms. It follows earlier actions establishing federal digital asset policy and a Strategic Bitcoin Reserve.

Stated Policy Objectives

The Order states that it is the policy of the United States to streamline regulatory processes, reduce unnecessary barriers to entry, and promote collaboration among fintech firms, federally regulated financial institutions, and federal financial regulators. It describes fintech firms as contributors to expanded access to financial services and economic opportunity. It also asserts that federal regulations should be updated to support the integration of digital assets and emerging technologies into traditional financial services and payment systems. The Order highlights concerns about fragmented or outdated regulatory requirements that may favor incumbent institutions.

Definition of “Fintech Firm”

The Order defines a fintech firm as any non‑bank company that uses or develops technology to offer or support financial products or services. The definition is broad and includes payment processing, lending, deposit‑taking, derivatives, investment management, brokerage services, underwriting, capital markets activities, custodial and fiduciary services, digital banking, digital asset services, securities and commodities activities, and blockchain‑based services. The Order incorporates by reference the financial activities listed in section 4(k)(4) of the Bank Holding Company Act.

Regulatory Review and Streamlining

Section 3 directs each federal financial regulator, including the CFPB, SEC, NCUA, CFTC, FDIC, and OCC, to conduct a review within 90 days of existing regulations, guidance, supervisory practices, and application processes. The review must identify items that could be updated to facilitate innovation and competition, including those that impede partnerships between fintech firms and federally regulated institutions. Agencies must also identify opportunities to streamline application processes for fintech firms seeking bank or credit union charters, deposit or share insurance, or other federal licenses and registrations.

The Order instructs agencies to balance innovation with safety and soundness, consumer and investor protection, market integrity, financial stability, and oversight. Within 180 days, each regulator is directed to take steps to encourage innovation based on the review, in consultation with the Assistant to the President for Economic Policy.

Access to Federal Reserve Payment Services

Section 4 requests that the Board of Governors of the Federal Reserve System conduct a comprehensive evaluation of the legal, regulatory, and policy framework governing access to Reserve Bank payment accounts and payment services by uninsured depository institutions and non‑bank financial companies, including firms engaged in digital assets and other novel activities. The Federal Reserve is asked to report within 120 days on:

  • the legal authority to extend direct access to such firms
  • options for expanding access subject to risk management requirements
  • legal impediments to direct access and potential legislative or regulatory solutions
  • whether individual Reserve Banks may act independently in granting or denying access and what policies should ensure consistent evaluation of applications

If the Federal Reserve determines that existing law permits expanded access, the Order requests that it establish transparent application procedures and make determinations on complete applications within 90 days.

Broader Context

The White House Fact Sheet describes the Order as part of a broader effort to position the United States as a global leader in financial innovation. It asserts that current rules governing access to payment services and third‑party risk management requirements may favor incumbents and that many financial regulations were designed for a brick‑and‑mortar environment. The Administration frames the Order as an attempt to modernize regulatory frameworks to reflect digital‑age financial services.

What This Means for Financial Institutions

Anticipated Regulatory Changes

The 90‑day review period means that by mid‑August 2026, each named regulator must complete its assessment. The 180‑day deadline for taking steps to encourage innovation extends into mid‑November 2026. Institutions should expect proposed rulemakings, updated guidance, or revised supervisory expectations to emerge on that timeline, particularly in areas involving bank‑fintech partnerships and chartering processes.

Third‑Party Risk Management and Bank‑Fintech Partnerships

The Order’s focus on regulations that impede partnerships suggests that existing interagency guidance on third‑party risk management, including the 2023 joint guidance issued by the OCC, FDIC, and Federal Reserve, may be revisited. Institutions with existing or planned fintech partnerships should anticipate potential adjustments to due diligence and oversight expectations. Current requirements remain in effect unless formally amended.

BSA/AML Considerations

Although the Order does not directly address Bank Secrecy Act or anti‑money laundering obligations, the potential expansion of Federal Reserve payment system access to non‑bank fintechs raises questions about the applicable AML/CFT framework for new direct participants. If non‑bank firms gain direct access, regulators will need to clarify whether and how BSA requirements apply. Institutions that currently serve as intermediaries for fintech payment flows should consider how their obligations may shift if those flows move to direct access models.

Federal Reserve Payment System Access

The Federal Reserve’s 120‑day report, expected by mid‑September 2026, will be a key milestone. The evaluation of whether individual Reserve Banks may act independently in granting access, and the emphasis on consistent evaluation standards, indicates concern about the current decentralized approach. Institutions that rely on privileged access to the Federal Reserve payment system as a competitive advantage should monitor this development closely.

Open Questions

Several issues remain unresolved. The Order does not specify what steps regulators must take after completing their reviews, leaving significant discretion to agency leadership. The Order states that it does not create enforceable rights and that implementation is subject to available appropriations. Any expansion of Federal Reserve access to non‑bank entities may require new legislation or a novel interpretation of existing authority under the Federal Reserve Act. Congressional engagement on these issues remains uncertain.

Conclusion

The Executive Order signals a significant policy direction for fintech regulation and the relationship between traditional financial institutions and non‑bank technology firms. Although the Order is primarily directive, the deadlines for regulatory review and Federal Reserve reporting create concrete milestones that will shape the regulatory landscape in the coming months. Financial institutions should evaluate how potential changes to third‑party risk management expectations, chartering processes, and payment system access may affect their operations and partnerships. We will continue to monitor developments as agencies complete their reviews and begin implementing the Order. If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. And please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

On April 30, 2026, the Financial Crimes Enforcement Network (“FinCEN”) published a notice and request for comment (the “Notice”) in connection with its renewal of Form 107, which Money Services Businesses utilize for registration and renewal purposes. FinCEN’s Notice proposes a renewal without change to Form 107, and the comment period remains open until June 29, 2026.

The Bank Secrecy Act (“BSA”) and its implementing regulations require MSBs to file an initial registration form, to renew the registration every two years, and maintain a list of their agents (if applicable).

As part of the Paperwork Reduction Act, FinCEN is required to periodically review Form 107. FinCEN must justify the necessity of the collection form and intended use, as well as provide an estimate of the burden in completing the form.

According to FinCEN’s analysis of Form 107 filings from the past three years, the number of MSBs filing an initial or renewal form has increased. The estimated burden associated with the initial filing is 50 minutes, depending on the number of fields an MSB must complete, 40 minutes for renewal, and 30 minutes for maintaining an agent list. FinCEN acknowledged that maintaining an MSB agent list may require additional time for purposes of auditing and verifying the list; however, FinCEN does not account for this time in estimated burdens.

Efforts to Implement AMLA

The Notice asks for comments on the following questions related to FinCEN’s efforts to implement the Anti-Money Laundering Act (“AMLA”):

  • Is there publicly available data that went unmentioned in this Notice, but that FinCEN should consider when estimating the number of MSB agents? If possible, please comment on the generalizability and other usability feature of the data.
  • How would changes in the size or composition of the MSB population affect FinCEN’s estimated burden? Are there other assumptions that are more likely to contribute to substantive inaccuracies in the total burden and cost estimates? If so, please describe.
  • What changes to FinCEN Form 107 would reduce common errors or omissions?

Section 6216 of the AMLA directs FinCEN to review BSA regulations and guidance to ensure there are appropriate safeguards to protect the financial system from threats posed by various forms of financial crime. To meet this objective, FinCEN has previously sought input through formal requests for information (“RFI”) on regulations, reporting, and recordkeeping requirements that protect the U.S. financial system while also minimizing regulatory burdens posed. Although the previous RFI did not expressly mention burdens on MSBs, FinCEN is using this Notice as an opportunity to assess the regulatory burdens imposed on MSBs. 

Risks Posed by Unregistered MSBs

According to Treasury’s most recent National Money Laundering Risk Assessment, MSBs, like other financial institutions, continue to face money laundering risks. Treasury cited the large number of current MSB principals and agents and highlighted the “outsized risks” posed by unregistered MSBs. Unregistered MSBs may include individuals and entities acting as part of an informal value transfer system (“IVTS”) or may include individuals and entities using their personal or business accounts to engage in money transmission. Treasury highlighted a recent enforcement action against an unregistered MSBs that resulted in a $37 million civil money penalty.

Regulatory and Operational Impact

As a reminder, accurate and complete MSB registration and agent maintenance is part of the MSB examination procedures.

Second, the AMLA‑related questions highlight where FinCEN wants industry input. The agency is probing data sources for agent counts and recurring Form 107 errors. This is an opportunity to identify gaps between agent rosters and operations and fields prone to stale or mis‑keyed entries.

Third, banks serving MSBs should read the 2026 National Money Laundering Risk Assessment. Recent enforcement actions illustrate that registration is closely tied to BSA/AML program effectiveness. Onboarding and periodic reviews of MSB customers should confirm proper registration.

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On April 23, 2026, the Department of Justice announced charges against two Chinese Nationals, Huang Xing Shan and Jiang Wen Jie, for wire fraud, the seizure of $700 million in Cryptocurrency and the seizure of a Telegram Channel and 503 websites as part of the Department’s effort to combat foreign fraud schemes that target American citizens.

Huang and Jiang oversaw a cryptocurrency investment fraud operation at the Shunda compound in Burma. The Shunda compound is known to have operated from January 2025 to November 2025 and used scam websites and mobile applications designed to mimic legitimate investment platforms to convince its victims into draining their savings. 

The workers at the compound were trafficked individuals. Huang was a manager at the compound who reportedly used violence against the workers. Jiang was a supervisor who managed the workers’ efforts to defraud Americans.  The Shunda Compound was eventually seized by law enforcement, causing Huang and Jiang to attempt to replicate their scheme at a different compound in Cambodia.  In 2026, Huang and Jiang attempted to return to Burma but were arrested by Thai Law Enforcement for immigration violations. Their cases are currently being investigated by the FBI’s New York Field Office with assistance from Thai authorities.  The Complaint filed against Jiang Wen Jie can be found here. The Complaint filed against Huang Xing Shan can be found here.

The Scam Center Strike Force, which combines the powers of the U.S. Attorney’s Office with the Department of Justice’s Criminal Division, the FBI, and the U.S. Secret Service to secure America against Southeast Asian cryptocurrency-related fraud and scams, also announced the seizure of a Telegram Channel used to recruit workers.

The Telegram Channel had more than 6,0000 followers and was used to convince workers to travel to Cambodia with promises of high-paying employment. Once the workers arrived, they were held against their will and forced to participate in the fraud scheme. The workers specifically targeted Americans, imitating U.S. bank customer service agents and US law enforcement to convince victims to provide their bank account information. The Telegram seizure case is being investigated by FBI’s Miami Field Office, U.S. Secret Service Headquarters, and investigators at the U.S. Attorney’s Office for the District of Columbia. The Strike Force also announced that JPMorgan Chase, Microsoft, and Meta voluntarily took internal investigative measures to combat the fraud operating on their systems and occurring under their names.

Additionally, 503 dot-com web domains were seized. The domains were disguised as legitimate investment platforms. Victims reported to law enforcement that these platforms were causing them to unknowingly deposit cryptocurrency funds and view supposed “returns” on what they believed were legitimate investments.  In reality, the scammers received the investments and the returns. Now, when an individual visits these sites, they are informed the sites have been seized by law enforcement.

The Strike Force also announced that more than $701,962,392.15 in cryptocurrency has been identified as allegedly involved in laundering of funds stolen from victims of cryptocurrency investment fraud. The Strike Force aims to return the funds to victims.

In coordinated actions, the US Department of Treasury announced sanctions against individuals and entities perpetrating cryptocurrency investment fraud schemes against Americans using forced labor and violence in Cambodia, and Department of State announced an award of up to $10 million for anyone with information concerning the Tai Chang scam centers.

These actions are line with President’s Trump’s Executive Order Combating Cybercrime, Fraud, and Predatory Schemes Against American Citizens. Fighting fraud continues to be a top priority of this Administration’s Justice and State Departments.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. And please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

Last month, the U.S. Department of the Treasury announced a new cybersecurity information‑sharing initiative led by its Office of Cybersecurity and Critical Infrastructure Protection (OCCIP). The program is designed to give eligible U.S. digital asset firms access to the same actionable cyber‑threat information Treasury already provides to traditional financial institutions. According to Treasury, the effort responds to a rapidly evolving threat environment and implements a key recommendation from the President’s Working Group on Digital Asset Markets (PWG) report issued under Executive Order 14178.

The announcement marks Treasury’s most direct step to date in extending its critical‑infrastructure protection mission to the digital‑asset sector—an industry Treasury now describes as “an increasingly important part of the U.S. financial sector.”

A New Cybersecurity Information‑Sharing Channel for Digital Asset Firms

Treasury’s press release explains that OCCIP will provide participating digital asset firms with “timely, actionable cybersecurity information” at no cost. The information mirrors what Treasury already shares with banks and other traditional financial institutions.

Treasury officials emphasized several themes:

  • Growing systemic importance of digital asset firms. Assistant Secretary for Financial Institutions Luke Pettit stated that the resilience of digital asset firms is now “critical to the health of the broader system.”
  • Cybersecurity as a prerequisite for responsible innovation. Counselor to the Secretary for Digital Assets Tyler Williams linked the initiative to the principles of the GENIUS Act, noting that strong cybersecurity and operational resilience are foundational to digital‑asset market development.
  • Escalating threat landscape. Deputy Assistant Secretary for Cybersecurity Cory Wilson highlighted the increasing frequency and sophistication of cyberattacks targeting digital‑asset platforms and the need for more robust, real‑time threat information.

Eligible firms may contact OCCIP directly to enroll.

How the Initiative Aligns with the PWG’s Digital‑Asset Recommendations

The April 9 announcement explicitly ties the OCCIP initiative to the PWG’s July 2025 report, Strengthening American Leadership in Digital Financial Technology, issued pursuant to Executive Order 14178.

Several recommendations in the PWG report provide the policy foundation for Treasury’s new program:

  1. Expand public‑private information sharing to counter illicit finance and cyber threats.
    The PWG report calls for Treasury to “encourage greater information sharing between the private and public sectors to more effectively target bad actors operating in the digital asset ecosystem,” emphasizing that such sharing should be used solely for illicit‑finance and national‑security purposes. Treasury’s new initiative operationalizes this recommendation by extending its existing financial‑sector threat‑information channels to digital‑asset firms.
  2. Equip digital‑asset actors to mitigate risk.
    The PWG report identifies a need for clearer expectations and more support for digital‑asset firms navigating AML/CFT and cybersecurity risks. It encourages agencies—including Treasury—to provide guidance and tools that help firms understand and meet their obligations. Providing direct access to actionable cyber‑threat intelligence is consistent with that objective.
  3. Promote operational resilience as digital assets integrate into the financial system.
    The PWG report frames cybersecurity as essential to responsible innovation and to the stability of U.S. financial markets as digital‑asset activity grows. Treasury’s messaging in the April 9 release echoes this theme, underscoring that digital‑asset firms’ resilience is now a matter of broader financial‑system health.

What This Means for Digital Asset Firms

Although the initiative is voluntary, it signals Treasury’s expectation that digital‑asset firms should begin aligning their cybersecurity posture with the standards long applied to banks and other regulated financial institutions.

  1. Heightened expectations for threat‑intelligence integration.
    Access to Treasury’s cyber‑threat information is only useful if firms have the internal capability to ingest, triage, and act on it. Firms may need to evaluate whether their security operations centers, incident‑response processes, and governance structures can operationalize this information effectively.
  2. A clearer link between cybersecurity and financial‑crime compliance.
    The PWG report situates cybersecurity squarely within the broader illicit‑finance risk framework. Treasury’s initiative reinforces that cyber‑risk and AML/CFT risk are increasingly intertwined—particularly for digital‑asset platforms that face both technical and financial‑crime threats.
  3. Early alignment with future regulatory expectations.
    While the initiative itself is not a rulemaking, it reflects Treasury’s policy trajectory. As digital‑asset firms become more integrated into the financial system, regulators may expect them to demonstrate cybersecurity maturity comparable to traditional financial institutions. Participation in OCCIP’s program could become a de facto indicator of baseline preparedness.

How This Fits into Treasury’s Broader Digital‑Asset Strategy

The OCCIP initiative is one component of a broader shift in Treasury’s approach to digital‑asset oversight:

  • National‑security framing. The PWG report repeatedly emphasizes the need to counter illicit finance and protect U.S. financial stability as digital‑asset markets grow. Treasury’s April 9 announcement continues that framing by positioning cybersecurity as essential to safeguarding consumers and markets.
  • Technology‑neutral expectations. The PWG report encourages regulators to adopt technology‑neutral frameworks that apply consistent standards across financial activities, regardless of whether they involve digital assets. Extending existing cybersecurity information‑sharing channels to digital‑asset firms reflects that approach.
  • Operationalizing Executive Order 14178. The Executive Order directs agencies to support responsible digital‑asset innovation while protecting national security. Treasury’s initiative is a concrete step toward implementing that mandate.

Treasury frames the initiative as a concrete step toward strengthening operational resilience in the digital‑asset sector and advancing the policy objectives outlined in Executive Order 14178 and the PWG report. Some market participants, however, may assess potential confidentiality, operational, or integration considerations associated with receiving government threat intelligence, as well as whether participation in a voluntary program could carry additional compliance expectations. More broadly, the effectiveness and implementation of expanded public‑private information‑sharing efforts will likely remain an area of industry interest and discussion. It remains to be seen how widely the industry will participate and what practical impact the initiative will have in addressing evolving cyber threats.

Looking Ahead

Treasury’s launch of this cybersecurity information‑sharing initiative is a notable development for digital‑asset firms, signaling that the sector is now firmly within the scope of Treasury’s critical‑infrastructure protection efforts. It also reflects the Administration’s broader strategy: encourage innovation, but pair it with heightened expectations for operational resilience and risk management.

For digital‑asset firms, the message is clear. As the sector becomes more interconnected with the traditional financial system, regulators expect cybersecurity maturity to keep pace. Treasury’s new program offers a pathway to do that—while also previewing the direction of future oversight.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. And please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

On April 8, 2026, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) and Office of Foreign Assets Control (OFAC) issued a joint Notice of Proposed Rulemaking (NPRM) to implement the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act). The proposal would create a comprehensive anti‑money‑laundering/countering‑the‑financing‑of‑terrorism (AML/CFT) and sanctions compliance framework for “permitted payment stablecoin issuers” (PPSIs), treating them as financial institutions under the Bank Secrecy Act (BSA). Treasury frames the rule as an effort to support responsible innovation in payment stablecoins while mitigating illicit‑finance risks (see also Treasury’s press release and Fact Sheet).

For our coverage of Treasury’s related Notice of Proposed Rulemaking on state oversight of stablecoin issuers, see our post here.

Statutory Background and Policy Context

The GENIUS Act directs that PPSIs be treated as financial institutions for BSA purposes and comply with federal laws relating to sanctions, money‑laundering prevention, customer identification, and due diligence. It also requires PPSIs to maintain an effective sanctions compliance program.

Treasury’s March 2026 Congressional Report highlights the rapid growth of digital assets, the increasing use of stablecoins in payments, and the ways illicit actors exploit them for fraud, ransomware, sanctions evasion, and money laundering. These findings inform the risk‑based approach reflected in the NPRM.

Primary and Secondary Market Activity

A central concept in the NPRM is the distinction between primary and secondary market activity. Primary market activity refers to direct interactions between a PPSI and a user, such as issuing, redeeming, converting, repurchasing, burning, reissuing, or providing custodial services. Secondary market activity involves transactions between third parties that rely on the PPSI’s smart contract but do not involve the PPSI as a counterparty. This distinction matters because several obligations—including suspicious activity reporting—apply only to primary‑market transactions. This distinction will shape how PPSIs design monitoring, SAR processes, and technical controls, because only primary‑market activity triggers most BSA obligations.

AML/CFT Program Requirements

The NPRM would require PPSIs to establish and maintain a written AML/CFT program that mirrors the core elements required of other financial institutions, with tailoring for stablecoin‑specific risks. PPSIs must implement internal policies, procedures, and controls to identify, assess, and mitigate illicit‑finance risks. Risk assessments must evaluate the PPSI’s business activities, incorporate the national AML/CFT priorities, and be updated promptly when risks change.

PPSIs would also be required to conduct ongoing customer due diligence, including understanding the nature and purpose of customer relationships, developing customer risk profiles, and monitoring for suspicious activity. On a risk basis, PPSIs must maintain and update customer information, including beneficial ownership information for legal‑entity customers.

Independent testing is required to assess whether the PPSI has implemented an effective AML/CFT program. PPSIs must designate a U.S.‑based AML/CFT compliance officer responsible for day‑to‑day compliance. The program must also include ongoing employee training tailored to employee roles and responsibilities and must be approved by the PPSI’s board or equivalent governing body.

The NPRM outlines a supervisory framework under which FinCEN would generally not take enforcement action if a PPSI has established an AML/CFT program and does not exhibit significant or systemic failures. It also describes a notice and consultation process between FinCEN and primary federal payment‑stablecoin regulators for significant supervisory actions. For many issuers, this will require adopting governance, documentation, and testing practices that resemble those of traditional financial institutions—a significant shift for engineering‑driven companies.

Suspicious Activity and Currency Transaction Reporting

PPSIs would be required to file suspicious activity reports (SARs) for any suspicious primary‑market transaction. The NPRM explicitly states that secondary‑market transfers are not, by themselves, considered transactions “by, at, or through” a PPSI for SAR purposes. PPSIs must retain SARs and supporting documentation for five years.

Currency‑transaction reporting (CTR) requirements would apply to transactions in currency exceeding $10,000, though Treasury notes that stablecoin issuers rarely engage in physical‑currency transactions.

Recordkeeping, Travel Rule, and Information Sharing

The NPRM would require PPSIs to comply with the BSA’s Recordkeeping Rule and Travel Rule for transfers of $3,000 or more and would amend the definition of “transmittal order” to expressly include payment stablecoins. PPSIs would also be integrated into the BSA’s information‑sharing framework, including Section 314(a) requests and voluntary Section 314(b) sharing.

Enhanced Due Diligence and Special Measures

The NPRM would apply the BSA’s enhanced due‑diligence requirements for correspondent accounts for foreign financial institutions and private‑banking accounts for non‑U.S. persons. PPSIs would also be subject to special measures under Section 311 of the USA PATRIOT Act, Section 9714(a) of the Combating Russian Money Laundering Act, and 21 U.S.C. 2313a.

Sanctions Compliance Program Requirements

The NPRM reflects a significant change in Treasury’s expectations for PPSIs. PPSIs would be required to maintain a formal sanctions compliance program—something other BSA‑regulated financial institutions are not explicitly required to do. OFAC sanctions remain a strict‑liability regime, but Treasury is elevating sanctions compliance to the same programmatic level as AML/CFT. Examiners would look not only at whether a PPSI violated sanctions, but at whether its program is designed, resourced, and operating in line with OFAC’s risk‑based expectations. A strong program would meaningfully mitigate enforcement exposure, while gaps or weak controls could carry greater consequences given the statutory mandate.

OFAC proposes requiring PPSIs to maintain an effective sanctions compliance program incorporating five core elements: senior‑management commitment; holistic risk assessments; risk‑based internal controls, including technical capabilities; independent testing and auditing; and risk‑based training. These elements align with OFAC’s existing guidance and reflect the GENIUS Act’s mandate that PPSIs comply with all federal sanctions laws applicable to financial institutions.

Technical Capabilities and Lawful Orders

The GENIUS Act requires PPSIs to maintain the technological capability to block, freeze, and reject impermissible transactions and to comply with lawful orders, including orders to seize, freeze, burn, or prevent the transfer of payment stablecoins. These expectations apply whenever a PPSI’s smart contract is involved, even in secondary‑market activity, and will require issuers to document how these controls function in practice. Because these controls must function whenever a PPSI’s smart contract is implicated, issuers will need to document how block, freeze, reject, and burn capabilities operate in practice and ensure they can withstand regulatory scrutiny.

Economic Impact

Treasury estimates that approximately 50 PPSIs may be subject to the rule, with first‑year compliance costs of about $1.8 million and ongoing annual costs of roughly $1 million. Government costs are estimated at $5.9 million in the first year, and customer costs at approximately $1.2 million annually. Treasury expects many PPSIs to be money‑services businesses or insured‑depository‑institution subsidiaries already subject to similar requirements, reducing incremental burden.

Key Takeaway

The proposal makes clear that Treasury now expects permitted stablecoin issuers to operate with the same level of AML, sanctions, governance, and technical rigor long required of mature financial institutions. The NPRM signals that PPSIs will need to build compliance into the core of their operating models—risk assessments, beneficial‑ownership collection, primary‑market SAR obligations, enhanced due diligence, and the ability to block, freeze, or burn tokens cannot be bolted on later. These expectations create a high regulatory bar, and not every current or aspiring issuer will be able to meet it. Firms with the capital, staffing, and engineering capacity to stand up a full BSA/OFAC program will be positioned to move forward, while smaller or less‑resourced issuers may struggle to qualify as PPSIs. The practical effect is a market that shifts toward a smaller number of issuers capable of operating under a full federal compliance regime. The framework ultimately favors well‑capitalized issuers and is likely to accelerate consolidation in the stablecoin market.

Next Steps

FinCEN and OFAC are accepting public comments for 60 days following publication in the Federal Register. Treasury seeks input on the clarity of definitions, the feasibility of technical requirements, the tailoring of obligations for PPSIs of different sizes and business models, and the interaction between federal and state regulatory frameworks.

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On March 31, 2026, the U.S. Department of the Treasury’s Office of Foreign Assets Control (“OFAC”) issued an advisory on sham transactions, highlighting the compliance risks financial institutions must navigate when facilitating international property transactions.

What is a Sham Transaction?

OFAC defines a “Sham Transaction” as one in which a blocked person, typically operating through proxies or intermediaries, effectuates the transfer or concealment of a continuing interest in property, without genuinely extinguishing said interest, in an attempt to evade U.S. sanctions. In other words, sham transactions are those in which an individual appears to relinquish property on paper but remains effectively in control of it.

Who do Sham Transactions Apply To?

OFAC publishes a List of Specially Designated Nationals and Blocked Persons (“SDN List”) that is intended to restrict the access of the named individuals to the American financial system by preventing them from transferring, withdrawing, or otherwise dealing with any property and interests that are within the United States or within the possession or control of a U.S. person and prohibiting U.S. persons from transacting with them.

If an individual is blocked, their assets are frozen, and they are unable to exercise the powers and privileges of their property and interests without authorization from OFAC.

How Do Sham Transactions Operate?

OFAC identifies numerous methods by which blocked persons conceal their property interest, often by manipulating opaque legal structures and working with proxies. The following are some examples of sham transactions:

  • A blocked oligarch transferred ownership of his private jet to a trust, whose sole beneficiary was his unsanctioned wife, while the oligarch continued to use the jet for travel.
  • A blocked person transferred millions of dollars of funds into trusts held for his minor children and then attempted to move these funds through U.S. banks.
  • Following its designation, a company sanctioned for narcotics trafficking was reincorporated under a different name with new nominal owners while continuing the blocked company’s operations.

How Can Financial Institutions Recognize a Sham Transaction?

OFAC’s advisory highlights a non-exhaustive set of red flags that may indicate a sham transaction. The advisory stresses the importance of employing a functional approach, considering the totality of the circumstances, when evaluating a potential sham transaction.

For additional analysis on OFAC guidance, see our related posts here.

The following are some indications financial institutions should be aware of when evaluating a transaction:

  • Commercially Unreasonable Transactions: Transfers of property in which a blocked person once held an interest on terms that are commercially unreasonable or at odds with fair market value may indicate a sham transaction.
  • Transfer to Family Members or Close Associates: Transfers of property to an individual with close personal or professional ties may indicate that the receiving party is acting as a nominal owner and may be acting on behalf of the transferring party.
  • Unclear Purpose: Transfers to an individual with no clear business purpose or relevant expertise with respect to the property at issue may be evidence of a sham transaction.
  • Complex Corporate Structures and High-Risk Jurisdictions: The presence of unnecessarily complex corporate structures, particularly in jurisdictions that lack robust regulatory oversight, may suggest an effort to conceal true ownership interests.
  • Involvement of a Blocked Person: If the circumstances indicate that a blocked person remains involved in the operation of a property, they may hold a concealed interest. The use of evasive or vague responses regarding the extent of a blocked person’s involvement may present further indicia of a concealed interest.
  • Transfer At Time of Designation: If a property or interest is transferred immediately preceding or following a person’s designation by OFAC, the transaction may warrant additional scrutiny.

Guidance for Financial Institutions

If financial institutions become aware that a blocked person once held an interest in property, OFAC recommends reviewing the available information to see if any of the above-listed red flags are present. OFAC acknowledges in its advisory that institutions may encounter legitimate business transactions where this occurs and does not wish to interfere with parties and institutions who seek to comply with OFAC sanctions in good faith.

If institutions become aware that a blocked person retains an interest in property that is held within the United States or is in the possession or control of a U.S. person, the property must be blocked and reported to OFAC.

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FinCEN has published a Notice of Proposed Rulemaking (“NPRM”) that would formalize and expand its whistleblower program, offering potentially substantial financial payouts to whistleblowers reporting certain financial crimes. According to FinCEN’s announcement, this initiative is designed to incentivize and protect individuals who report violations of major financial crime laws—specifically, the Bank Secrecy Act (“BSA”), the International Emergency Economic Powers Act (“IEEPA”), the Trading With the Enemy Act (“TWEA”), and the Foreign Narcotics Kingpin Designation Act (the “Kingpin Act”). Treasury Secretary Scott Bessent has said that through this rule, “Treasury will reward whistleblowers who provide timely, actionable information on fraud, sanctions violations, and other significant illicit finance activity[.]”Under the proposed rule, whistleblowers could be entitled to 10-30 percent of monetary penalties the government collects as a result of whistleblower tips.

The NPRM, which notably requires a 120-day waiting period for whistleblowers involved in certain fiduciary and compliance functions, highlights the importance of investing in robust compliance programs. It signals heightened enforcement interest in financial crimes, and advertises weighty incentives to motivate potential whistleblowers.

Overview and Legal Authority

FinCEN cites to the BSA, as strengthened by the Anti-Money Laundering Act of 2022 and the Anti-Money Laundering Whistleblower Improvement Act of 2022 (codified at 31 U.S.C. § 5323), for its authority to implement the proposed rule. The relevant statutory provision states:

In any covered judicial or administrative action, or related action, the Secretary, under regulations prescribed by the Secretary, in consultation with the Attorney General and subject to subsection (c), shall pay an award or awards to 1 or more whistleblowers who voluntarily provided original information to the employer of the individual, the Secretary, or the Attorney General, as applicable, that led to the successful enforcement of the covered judicial or administrative action, or related action, in an aggregate amount equal to—

(A) not less than 10 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions; and

(B) not more than 30 percent, in total, of what has been collected of the monetary sanctions imposed in the action or related actions.

FinCEN established an Office of the Whistleblower, which began receiving whistleblower tips in 2021. This proposed rule would formalize and significantly enhance this program. The proposed rule:

  • Defines key terms, such as “covered action”, “original information”, “voluntary submission”, “monetary sanctions”, and “related action;”
  • Provides for submission through a standardized, secure online form;
  • Outlines requirements to apply for an award;
  • Sets forth eligibility criteria for awards and the process for adjudicating award applications;
  • Details confidentiality and anti-retaliation protections; and
  • Implements a system for appealing adverse determinations, and for barring bad-faith or abuse of the whistleblowing program.

Eligibility Requirements for Whistleblower Award

The rule details four requirements for a whistleblower to be eligible for an award: (1) voluntary submission of original information; (2) the whistleblower is the original source of the original information; (3) the original information led to the successful enforcement of a covered action or related action; and (4) the whistleblower provides certain additional information to Treasury and DOJ upon request.

One key function of the proposed rule is to thoroughly define what qualifies as “original information.” It identifies four elements that must be met for FinCEN to find that a whistleblower provided qualified original information. These elements are:

  • The information must be “derived from the independent knowledge or independent analysis of [the] whistleblower.” In the NPRM, FinCEN explains that independent knowledge does not require the whistleblower to have direct, first-hand knowledge of potential violations. Rather, their knowledge must be obtained from their own experiences, observations, or communications, and not from public sources. On the other hand, independent analysis may be based on information that is generally available or known, as long as the analysis “results in material insights” that are not generally known or available to the public.
  • The information is not already known to Treasury or DOJ.
  • The information is not exclusively derived from an allegation made in a publicly available source, including judicial or administrative hearings.
  • The information is provided to Treasury or DOJ after the enactment of the statutes that established the Whistleblower Program and amended its scope (January 1, 2021 for violations of the BSA, and December 29, 2022 for violations of the IEEPA, TWEA, and the Kingpin Act).

Equally important is the proposed rule’s definition of voluntariness. In the proposed rule, FinCEN explains that a submission is voluntary if it is made before the whistleblower receives any request for information about the subject matter. Thus even an informal request for information would negate the voluntariness requirement.

The proposed rule also defines “covered action” as  “an administrative or judicial action taken by Treasury or DOJ under certain ‘covered statutes’ … the BSA, IEEPA, TWEA, and the Kingpin Act” where monetary sanctions exceed $1,000,000. Notably, the proposed rule grants FinCEN the discretion to treat multiple actions as a single “covered action” if they arise out of substantially the same facts, such that those actions could collectively exceed the $1,000,000 threshold.

Through these regulatory definitions, FinCEN seeks to establish clear standards for the circumstances under which a whistleblower may be entitled to an award, as well as situations in which a whistleblower may be excluded from participation.

One key limitation FinCEN proposes is a 120-day waiting period for whistleblowers involved in fiduciary or compliance roles within an entity. The proposed rule would prevent whistleblowers from receiving an award where their position in certain key roles within an entity—such as serving as a director or trustee, participating in internal compliance processes, or serving as an employee or outside contractor with duties involving audit or compliance responsibilities—is the reason the whistleblower obtained the potentially reportable information, and they report the information within 120 days of learning it. According to FinCEN’s announcement, this waiting period seeks to provide entities an opportunity to address issues or voluntarily disclose information to the government, and to avoid incentives for whistleblowers to undermine effective compliance programs.

Implications

Through this proposed rule, FinCEN clearly seeks to signal renewed, enhanced enforcement of financial crimes, and incentivize whistleblowers to come forward.

In addition to spelling out eligibility criteria, which in theory lessens the uncertainty potential whistleblowers may feel about their opportunity to gain from acting as a whistleblower, the proposed rule contains numerous provisions detailing procedural and operational implementation of the program. These provisions, which, for example, identify a secure portal for submitting information, detail the process for submitting and adjudicating award applications, and spell out confidentiality and anti-retaliation protections, seek to provide even further comfort for potential whistleblowers and establish a robust program for soliciting and processing tips.

FinCEN is accordingly projecting a substantial increase in the number of whistleblower tips it receives, estimating that it will receive approximately 250 original submissions and 150 supplemental submissions annually within three years of the rule’s effective date. This is a dramatic increase from the approximately 90 submissions it received per year between 2021 and 2024.

As the rule is not yet final (it is subject to a 60-day notice and comment period), some of the details may change. Nonetheless, the proposed framework provides substantial insight into the direction FinCEN is moving, and suggests is quite possible that there will be a notable increase in whistleblower activity following the rule’s implementation.

If you would like to remain updated on these issues, please click here to subscribe to Money Laundering Watch. And please click here to find out about Ballard Spahr’s Anti-Money Laundering Team.

As part of the U.S. Department of Treasury’s efforts to modernize the U.S. anti-money laundering regulatory and supervisory framework, the Financial Crimes Enforcement Network (FinCEN) has issued a proposed rule that would reform how financial institutions design and operate their anti-money laundering and countering the financing of terrorism (AML/CFT) programs. Though not a wholesale rebuild of the existing framework, FinCEN and the banking regulators are signaling a new emphasis on an approach that prioritizes risk-based effectiveness over process-driven compliance and establish FinCEN’s central role in AML/CFT supervision among the Federal bank regulators.

The Current Regulatory Landscape for AML/CFT Programs

Under the Bank Secrecy Act (BSA), financial institutions are required to establish AML/CFT programs designed to identify, prevent, and report financial crime. FinCEN, as the administrator of the BSA, plays a principal role in setting program standards and coordinating with federal banking supervisors – including the Federal Reserve, the Federal Reposit Insurance Corporation (FDIC), the Office of the Comptroller of Currency (OCC), and the National Credit Union Administration (NCUA) – who examine the institutions they oversee for compliance.

Historically, institutions’ compliance has been measured in part on whether they are adequately managing their AML / CFL responsibilities, with regulators assessing the design and operation of compliance programs. Much of the reform is aimed at moving away from a framework that critics argue encourages “check-the-box” compliance, focusing instead on achieving meaningful results. As Treasury Secretary Scott Bessent put it, “For too long, Washington has asked financial institutions to measure success by the volume of paperwork rather than their ability to stop illicit finance threats.” Bessent added that, “Our proposal restores common sense with a focus on keeping bad actors out of the financial system, not burying America’s banks in more red tape.”

What’s Driving the Rulemaking?

The proposed rule is part of Treasury’s broader effort to modernize the AML/CFT regulatory and supervisory framework. It also implements key provisions of the Anti-Money Laundering Act of 2020 (AML Act), which, among other things, directed FinCEN and federal regulators to consider that compliance programs should be “risk-based, with more financial institution attention and resources directed toward higher-risk customers and activities…rather than toward lower-risk customers and activities.”

Results Over Process

FinCEN’s Fact Sheet accompanying the proposed rule identifies six key reforms that, taken together, signal a regulatory philosophy focused on outcomes rather than procedural box-checking:

  • Refocusing compliance obligations and expectations on effectiveness by distinguishing between deficiencies stemming from program design (“establishment”) and program implementation (“maintenance”);
  • Reinforcing Treasury’s belief that financial institutions are best positioned to identify and evaluate their money laundering, terrorist financing, and illicit finance risks;
  • Empowering financial institutions to direct more attention and resources toward higher-risk customers and activities;
  • Clarifying expectations related to certain program requirements and functions – including independent testing and audit functions – to ensure that examiners and auditors do not substitute their subjective judgment in place of financial institutions’ risk-based and reasonably designed AML/CFT programs;
  • Affirming FinCEN’s central role in AML/CFT supervision, including through the introduction of a notice and consultation framework between Federal banking supervisors and FinCEN with respect to significant AML/CFT supervisory actions;
  • Incorporating the AML/CFT Priorities in both AML/CFT program requirements and considerations involving significant supervisory or enforcement actions.

Three Areas of Significant Impact

Among these reforms, three are likely to have the most immediate impact on day-to-day compliance.

First, the proposed rule would make FinCEN the gatekeeper for significant supervisory and enforcement actions. Under a new notice and consultation framework, federal banking supervisors would be required to give FinCEN’s Director at least 30 days’ advance written notice before initiating a significant AML/CFT supervisory action under delegated authority. For banks, this suggests that FinCEN – not any single prudential regulator – will increasingly set the tone for AML/CFT supervision. Both the American Bankers Association and Bank Policy Institute   welcomed this development citing FinCEN’s “elevated role” as a step towards “ensur[ing] greater alignment and consistency across agencies.”

Second, the rule would establish that only “significant or systemic failures” to maintain a properly established AML/CFT program would warrant enforcement or significant supervisory action. In practice, this could reduce enforcement risk for institutions with sound programs but experience isolated implementation issues.

Third, the rule would include the four “core pillars” that an AML/CFT program must incorporate pursuant to the BSA: (1) internal policies, procedures, and controls, including risk assessment processes; (2) independent program testing; (3) designation of a U.S.-based compliance officer; and (4) ongoing employee training. By standardizing these requirements across institution types, FinCEN aims to promote consistency and reduce the patchwork of obligations that currently exist.

What’s Next?

FinCEN is accepting public comments for 60 days following publication of the Notice of Proposed Rulemaking in the Federal Register. The federal banking supervisors – the Federal Reserve, FDIC, OCC, and the NCUA – are also expected to issue their own proposed rules in substantive alignment with FinCEN’s proposal. Financial institutions should begin evaluating how these changes may affect their programs and whether to weigh in during the comment period.

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The U.S. Department of the Treasury has issued its first proposed rule under the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, marking a key milestone in federal efforts to regulate payment stablecoins. The Notice of Proposed Rulemaking (NPRM) outlines the principles Treasury will use to assess whether a state’s regulatory regime is “substantially similar” to the federal framework, which determines whether certain stablecoin issuers may be supervised by states rather than the OCC or other federal agencies. Comments on the proposal are due by June 2, 2026.

Background: The GENIUS Act’s Federal–State Opt-In Model

Passed in July 2025, the GENIUS Act created the first comprehensive federal framework for stablecoin regulation. (See our blog post, here.) It allows “State qualified payment stablecoin issuers,” defined as issuers with up to $10 billion in outstanding issuance, to elect state-level supervision if their state’s regulatory regime is certified as “substantially similar” to the federal approach. The model is intended to balance innovation, flexibility, and uniformity while reducing opportunities for regulatory arbitrage.

Treasury published an Advance Notice of Proposed Rulemaking (ANPRM) in September 2025 to gather stakeholder feedback. The current NPRM reflects that input and begins the formal rulemaking process.

Scope and Structure of the NPRM

The proposed rule would add a new Subchapter C to Title 12 of the CFR, containing:

  • Part 1520: Authority, purpose, and scope
  • Part 1521: Core principles for determining substantial similarity between state and federal regimes

Part 1521 is the key component of the proposal and sets out how Treasury will evaluate whether a state’s regime meets or exceeds the standards required by section 4(a) of the Act.

Defining the Federal Regulatory Framework

A central question addressed by the NPRM is what constitutes the “Federal regulatory framework.” Treasury proposes a definition that extends beyond the statute and includes:

  1. The GENIUS Act
  1. OCC regulations and formal interpretations published in the Federal Register
  1. Treasury regulations and guidance implementing BSA, sanctions, and technological compliance requirements under sections 4(a)(5) and (6)
  1. Federal Reserve Board rules implementing the Act’s anti-tying provisions under section 4(a)(8)

Treasury explains that relying solely on statutory text would leave significant gaps, particularly in prudential areas such as capital, liquidity, and reserve diversification, where implementing detail resides in agency rules. The OCC’s framework serves as the primary baseline for comparison because most state-qualified issuers are nonbanks that would transition to OCC oversight if they exceed the $10 billion threshold.

Uniform Requirements and State-Calibrated Flexibility

The NPRM distinguishes between two categories of requirements:

  • Uniform requirements: Areas where the Act provides no substantive discretion. State regimes must align with the federal framework. Examples include reserve asset requirements, AML/BSA/sanctions programs, and core disclosure and naming restrictions.
  • State-calibrated requirements: Areas where states may tailor standards if the outcomes are at least as robust as the federal model. These include capital requirements, certain governance provisions, and some risk management practices.

Appendix A maps each statutory requirement to one of these categories and provides a practical guide for state regulators.

Federal Law and State Qualified Issuers

Treasury reiterates that state-supervised issuers remain subject to all applicable federal statutory requirements unless the Act expressly provides otherwise. State regimes cannot authorize activities prohibited under federal law, and federal disclosure and naming restrictions apply universally. The goal is to maintain a consistent baseline of protections regardless of supervisory regime.

Principles, Flexibility, and Ongoing Supervision

States may impose requirements beyond the federal baseline as long as they do not conflict with federal law or undermine substantial similarity. Statutes, regulations, and enforceable guidance may all serve as vehicles for compliance.

The NPRM also addresses how future federal legislation or rule changes could interact with state frameworks and seeks comment on definitional issues, classification of requirements, and whether rules for foreign issuers should be incorporated.

Next Steps in the Rulemaking Process

Treasury is seeking comment on all aspects of the proposal, including the scope of the federal regulatory framework, the division of statutory requirements into uniform and state-calibrated categories, the degree of flexibility states should retain, and the practical criteria for assessing substantial similarity. Comments are due June 2, 2026, according to the Federal Register notice.

Outstanding Issues and Policy Implications

Although the NPRM clarifies core structural elements, several practical questions remain:

  1. Supervision and enforcement: The proposal emphasizes supervisory design but is less specific about how Treasury will evaluate the strength or consistency of state enforcement.
  1. Durability of certification: The NPRM does not detail how Treasury will monitor state regimes over time or under what conditions certifications may be revisited or withdrawn.
  1. Regulatory competition: Allowing state-level supervision may encourage innovation but could also create competitive pressures among states. The rigor with which Treasury applies the “meet or exceed” standard will be central to preventing regulatory arbitrage.
  1. Issuer threshold management: The NPRM explains the $10 billion transition point but does not address how Treasury might respond if issuers structure operations to remain within the state-qualified category.

Conclusion

Treasury’s proposed rule provides the first detailed framework for harmonizing state and federal oversight of stablecoin issuers under the GENIUS Act. Its two-tier structure, which combines uniform requirements with calibrated flexibility, reflects an effort to maintain consistent protections while supporting regulatory innovation. Stakeholders should review the proposal closely and consider submitting comments by the June 2, 2026 deadline.

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Recently, a federal judge in the Eastern District of Texas vacated FinCEN’s residential real estate rule (the “Rule”) finding that the agency exceeded its statutory authority under the Bank Secrecy Act (the “BSA”). Flowers Title Companies, LLC v. Bessent, Case No. 6:25-cv-127 (E.D. Tex. Mar. 19, 2026). Since finalization in 2024, the Rule has been subject to litigation in various jurisdictions. The Rule requires the collection and reporting of information to FinCEN in connection with transfers of residential real estate to entities and certain trusts that do not involve financing by a lender subject to anti-money laundering requirements under the BSA.

FinCEN’s website was subsequently updated with an alert indicating that “[i]n light of a federal court decision, reporting persons are not currently required to file real estate reports with FinCEN and are not subject to liability if they fail to do so while the order remains in force.”

While the decision affords reporting persons a reprieve from filing requirements, this is not likely the end for the real estate sector. FinCEN and the Financial Action Task Force (“FATF”) have long recognized anti-money laundering risks posed by the real estate market. We have previously blogged about FATF’s guidance related to the real estate sector here. 

Flowers Title Companies, LLC v. Bessent

The Plaintiffs challenged the Rule under the Administrative Procedures Act (“APA”), claiming that the Rule exceeded FinCEN’s statutory authority under the BSA. Plaintiffs alternatively claimed that if the BSA does authorize the Rule, then the BSA violates the “nondelegation doctrine” of the Commerce Clause, exceeds Congress’s enumerated powers, and violates the Fourth Amendment.

FinCEN relied on following two provisions of the BSA as justification of their authority to promulgate the Rule:

31 U.S.C. § 5318(g)(1)

Section 5318(g)(1) of the BSA states that FinCEN “may require financial institution, and any director, officer, employee, or agent of any financial institution, to report any suspicious transaction relevant to a possible violation of law or regulation.” FinCEN argues that non-financed transfers of residential real estate are a type of suspicious transaction that requires reporting.

The Court held that FinCEN failed to show how non-financed residential real estate transactions were categorically suspicious pursuant to 31 U.S.C. § 5319(g)(1). The Court acknowledged that there may be bad actors conducting suspicious non-financed real estate transactions, but that does not make them categorically suspicious, and FinCEN failed to provide sufficient evidence showing otherwise.

31 U.S.C. § 5318(a)(2)

Section 5318(a)(2) of the BSA states that FinCEN may “require a class of domestic financial institutions or nonfinancial trades or businesses to maintain appropriate procedures, including the collection and reporting of certain information[.]” The Court held that 31 USC § 5318(a)(2) does not provide FinCEN with the appropriate authority to adopt the Rule, but instead gives FinCEN the authority to require financial institutions to maintain procedures to comply with the BSA. 

The decision in Flowers differs from a recent Florida case where the Margistrate Judge’s Report and Recommendation concluded that FinCEN’s motion for summary judgment should be granted and that the Rule was statutorily authorized by the BSA. Fid. Nat’l Fin., Inc. v. Bessent, case No. 3:25-cv-554 (M.D. Fla. Dec. 9, 2025). FinCEN relied on similar statutory provisions as justification of the Rule.

At the time of the writing of this blog post, FinCEN had not filed a notice of appeal.

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