An exclusive article by Fred Kahn
Programs exist largely to reassure regulators, not to stop criminals, and this latest FinCEN survey appears to reinforce that idea. By asking non-bank financial institutions to quantify the costs of anti-money laundering compliance, the US Treasury bureau is framing the debate not around effectiveness but around expense. The framing is strategic. Institutions are asked about staff hours, software investments, third-party vendor bills, and opportunity costs of compliance measures, but they are not asked about the benefits of disrupting criminal networks or protecting the integrity of financial systems. This choice of focus reveals much more than it pretends to measure.
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The FinCEN survey and its AML cost narrative
The timing is equally revealing. The United States has recently taken steps that critics describe as anti-compliance, rolling back or diluting certain reporting requirements, easing thresholds for filings, and leaning toward financial innovation over systemic safeguards. By launching a cost-centric survey, FinCEN is not merely gathering data. It is building a narrative that compliance is a burden worth trimming, potentially paving the way for deregulation. This rhetoric is convenient for industry lobbyists, especially those who want reduced obligations for fintechs, crypto platforms, and smaller intermediaries. It ignores that money laundering and terrorism financing are not abstract risks but surging global realities, with criminal flows estimated at over two trillion dollars annually according to intergovernmental studies.
The real danger is that the survey can be presented as “evidence” that AML frameworks are too heavy and too costly, shifting the policy debate from “how to make them more effective” to “how to make them cheaper.” If that becomes the dominant narrative, the US may choose to lower the bar rather than raise the stakes, a move that could embolden criminal networks and weaken the collective AML effort.
The hidden push for deregulation
This survey is not an isolated initiative. It comes against the backdrop of a financial environment increasingly shaped by lobbying and the rhetoric of efficiency. Non-bank institutions, particularly money service businesses, payment processors, crypto exchanges, and lending platforms, are often vocal about the burden of compliance. By amplifying these concerns, FinCEN may be preparing the groundwork for justifying policy rollbacks.
A deregulation push under the guise of “cost rationalization” would not be new. US history is full of examples where financial oversight was softened to encourage growth, only to result in crises or scandals. The dismantling of parts of the Glass-Steagall Act, the subprime deregulation era, and the light-touch approach to derivatives all share the same DNA: weaken oversight in the name of competitiveness and efficiency, then face catastrophic consequences later. AML compliance risks being added to that list.
What makes this maneuver especially concerning is its selective blindness. The global environment today is not one of declining risks. On the contrary, transnational organized crime, drug cartels, kleptocrats, and terror financiers are expanding their reach, exploiting gaps in cross-border cooperation and new digital infrastructures. From darknet marketplaces to sophisticated layering schemes across multiple jurisdictions, the complexity of illicit finance is growing. To reduce compliance obligations now, and to portray them as excessive, risks opening the floodgates at precisely the wrong moment.
It is also important to note that non-bank financial institutions are often the weak links in AML chains. They lack the resources of major banks, yet they channel huge sums of money globally. They are attractive targets for bad actors precisely because they can be pressured into lobbying for lighter oversight, and their lobbying can be repurposed by regulators into a deregulation agenda. The survey FinCEN has launched fits neatly into this cycle.
What is ignored when AML costs dominate the debate
By focusing exclusively on compliance costs, FinCEN is distorting the conversation in three dangerous ways. First, it omits the cost of non-compliance, both in reputational terms and systemic damage. When major laundering schemes are exposed, the fallout is measured not only in fines but in loss of trust, market volatility, and political consequences.
Second, it hides the social cost of money laundering and terrorism financing. Illicit funds laundered through weak oversight enable human trafficking, drug epidemics, corruption, and the financing of extremist networks. These costs are borne by societies worldwide, not by compliance budgets. To prioritize the financial comfort of institutions over the safety of communities is an inversion of values.
Third, the survey disregards the potential for innovation within compliance itself. Compliance does not have to be an obstacle. Properly incentivized, it can drive technological advancement in artificial intelligence, blockchain forensics, and cross-border data sharing. Instead of presenting AML obligations as a deadweight loss, regulators could encourage efficiency gains while maintaining high standards. The survey misses this opportunity, opting for a narrative that pits compliance against growth.
A progressive path could involve both regulatory satisfaction and genuine innovation. Institutions that demonstrate real breakthroughs in detecting criminal networks should be rewarded not just with reputational recognition but with structured incentives. However, these rewards must not allow institutions to relax in other areas. A firm that uncovers a major laundering operation cannot be excused for weak onboarding controls elsewhere. Regulators should design reward systems that recognize achievements while enforcing comprehensive strength. This would shift the dynamic from box-ticking exercises to real risk mitigation, ensuring that compliance officers, investigators, and innovators alike are aligned with both regulatory expectations and societal goals.
Why this narrative matters for global AML efforts
FinCEN’s survey might look like an internal bureaucratic exercise, but it sends signals far beyond Washington. If the United States begins to shift its AML focus from effectiveness to cost reduction, other jurisdictions may follow. Countries competing for capital often mimic the lightest regime, creating a race to the bottom. This dynamic is especially visible in crypto regulation, where certain hubs loosened rules to attract business, only to become epicenters of laundering scandals later.
Global watchdogs consistently stress the need for robust frameworks and international alignment. If the US, traditionally a leader in financial oversight, reorients toward deregulation, it risks weakening that international consensus. The argument that “compliance is too costly” becomes an easy exportable narrative for countries that prefer not to invest in effective supervision.
At the same time, the survey risks undermining trust between regulators and compliance professionals. Front-line AML officers already struggle with skepticism from executives who see compliance as a burden rather than a duty. A government-led initiative emphasizing cost could embolden these executives to cut budgets, downsize teams, or deprioritize technology upgrades. This weakens internal defenses precisely when criminal innovation is at its peak.
The larger irony is that a cost-obsessed narrative can produce higher costs in the long run. Deregulation may save firms money in the short term, but the resulting scandals, fines, and systemic instability inevitably prove more expensive. The 2008 crisis was not caused by AML deficiencies, but it remains a cautionary example of how cheap oversight creates massive social and financial costs. To repeat this pattern in the AML space would be reckless.
Related Links
- FinCEN Official Website
- US Treasury Department
- FATF Official Website
- Office of Foreign Assets Control (OFAC)
Other FinCrime Central Articles About Deregulation Trends
- US Government Drops AML Lawsuits Against Coinbase and Robinhood Amidst Crypto Deregulation
- Senator Ted Cruz Fights Against IRS DeFi KYC Regulations
- Wall Street Optimism Eases: Trump Victory’s Mixed Signals for Bankers
Source: FinCEN’s Survey on Costs of AML/CFT Compliance
Some of FinCrime Central’s articles may have been enriched or edited with the help of AI tools. It may contain unintentional errors.
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