The recent Notice of Proposed Rulemaking from the Financial Crimes Enforcement Network marks a meaningful shift in how AML/CFT programs are designed, assessed, and ultimately judged.
Aligned with broader priorities from the U.S. Department of the Treasury, the direction of travel is towards frameworks that prioritise judgement, proportionality, and demonstrable effectiveness over procedural output.
As Treasury Secretary Scott Bessent emphasised, the goal is not to “bury” institutions in “red tape”, but to keep bad actors out of the system. That means moving away from measuring success by the “volume of paperwork” and towards the design of effective programs grounded in a clear understanding of a financial institution’s risk profile.
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What’s changing and why does it matter?
The proposed rule formalises several important shifts:
- AML becomes AML/CFT – Counter-terrorist financing is now explicitly embedded, expanding both scope and scrutiny
- Effectiveness over technical compliance – Supervisory and enforcement activity will focus on program effectiveness, not just technical adherence
- Risk-based allocation – Financial institutions are expected to direct more attention and resources toward higher-risk customers and activities, rather than lower-risk ones
- Clearer expectations on program design – Stronger emphasis on governance, independent testing, and ongoing employee training
Specifically, under the proposed rule, financial institutions would be required to design a risk-based AML/CFT framework built around four core pillars:
- Internal policies, procedures, and controls
- A designated US based compliance officer
- Ongoing employee training
- Independent testing of the program
How does this impact private markets fund managers?
For private markets participants, the impact is twofold:
- Directly: Firms operating as broker-dealers fall squarely within scope
- Indirectly: Banks—subject to the same standards—will push stricter requirements downstream to managers
In practice, fund managers will increasingly need to evidence not just compliance, but control, oversight, and effectiveness—often to satisfy banking partners as much as regulators.
What are the operational challenges?
Fragmented KYC processes, siloed AML data, and manual oversight make it difficult to:
- Get a clear picture of the firm’s overall risk profile, and where risks lie
- Design and apply a consistent, proportionate risk-based approach
- Maintain accurate, up-to-date investor profiles
- Evidence program effectiveness under scrutiny
In a regime focused on effective program design, a clear understanding of risk, both at the outset of investor relationships and across the fund lifecycle, is fundamental to the successful design and implementation of AML/CFT programs.
How Sonata One helps
At Sonata One, we simplify and strengthen AML/CFT compliance for broker-dealers and fund managers—combining technology with expert human oversight to design and deliver AML/CFT programs grounded in a clear understanding of risk and built to withstand regulatory scrutiny.
We support you with:
- A “one and done” investor KYC approval process across the full fund lifecycle
- Applying and maintaining appropriate KYC and risk ratings through an integrated, risk-based approach
- Continuous monitoring of PEPs, sanctions, and high-risk jurisdictions
- A managed service ensuring investor KYC is collected in line with associated risk ratings, supported by our team of experts
- A single source of truth for investor data, enabling fast reviews and timely responses to queries
- AML regulatory reporting support
- Independent oversight and compliance monitoring, with clear, actionable insights
- Board and regulatory reporting evidencing control over outsourced arrangements
- Ongoing training and expert guidance, including regulatory updates and risk advisory support
The result is an AML/CFT program that is not just compliant on paper, but demonstrably effective in practice and aligned with the direction of travel set by FinCEN.
What next?
The Financial Crimes Enforcement Network is inviting public comment on the proposed rule until 9 June 2026.
For private markets firms, this is more than a regulatory update, it is a prompt to reassess whether current AML/CFT frameworks are built for where supervision is heading. Reach out to our team to find out how we can support you in getting compliance ready.
Read our recent perspective on: Why Robust Compliance Infrastructure Is Key to Efficient Fundraising and Investor Servicing in Luxembourg – Here
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