Enhanced Customer Due Diligence

AML Evolution Accelerates

Financial regulators worldwide are intensifying scrutiny on enhanced customer due diligence as money laundering tactics grow more sophisticated. In the United States, FinCEN has rolled out updates throughout 2025, including exemptions for taxpayer identification collection and relief from redundant beneficial ownership verifications. These changes aim to streamline processes while maintaining vigilance against illicit flows, particularly in emerging sectors like cryptocurrencies.

The expansion of Bank Secrecy Act requirements to registered investment advisers, effective January 1, 2026, affects over 15,000 firms managing trillions in assets. These entities must now implement risk-based programs to assess customer relationships, monitor transactions, and update profiles—failure to do so could lead to enforcement actions similar to the $48.5 million settlement levied by the New York Department of Financial Services in August 2025 for due diligence lapses.

Globally, the Financial Action Task Force updated its high-risk jurisdiction lists in February 2026, urging enhanced measures against countries like North Korea and Iran. This impacts cross-border banking, where institutions must apply countermeasures, increasing operational costs estimated at hundreds of millions annually for large banks. Smaller players, meanwhile, face disproportionate burdens, potentially stifling competition.

Non-obvious tensions arise in balancing deregulation efforts, such as the National Credit Union Administration's proposals to simplify rules, with demands for 'effective' compliance. While AI tools promise real-time detection, over-reliance risks missing nuanced threats, as highlighted in recent guidance emphasizing human oversight. In Europe, the Anti-Money Laundering Authority's operational start in Frankfurt adds another layer, harmonizing standards but creating divergence from U.S. approaches that prioritize innovation in stablecoins.