Permitted Payment Stablecoin Issuers AML/CFT Program and Sanctions Compliance Program Requirements

Executive Summary

1. On March 23, 2026, the Financial Crimes Enforcement Network (FinCEN) submitted a proposed rule titled “Permitted Payment Stablecoin Issuers Anti-Money Laundering/Countering the Financing of Terrorism Program and Sanctions Compliance Program Requirements” to the Office of Information and Regulatory Affairs (OIRA) for review.
2. This rulemaking represents the critical AML/CFT and sanctions component of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed into law on July 18, 2025.
3. The GENIUS Act establishes the first comprehensive federal framework for payment stablecoins in the United States. It designates Permitted Payment Stablecoin Issuers (PPSIs) as “financial institutions” under the Bank Secrecy Act (BSA). It mandates that Treasury, through FinCEN, develop tailored rules requiring robust AML/CFT programs and sanctions compliance frameworks.
4. This FinCEN proposal complements parallel rulemakings by the OCC, FDIC, and NCUA, which address licensing, reserve requirements (1:1 backing with high-quality assets), redemption rights, and prudential standards—but explicitly defer BSA/AML/sanctions obligations to this separate Treasury-led effort.

Key anticipated requirements for PPSIs include:

• Implementation of a comprehensive, risk-based AML/CFT program (including Customer Due Diligence/KYC, ongoing transaction monitoring, Suspicious Activity Reporting, and recordkeeping).
• A dedicated sanctions compliance program (including screening, token freezing/blocking capabilities for illicit or sanctioned activity, and annual board-level certifications).
• Integration of FinCEN’s national AML priorities with emphasis on high-risk stablecoin and cross-border flows.
• Use of innovative technologies (e.g., blockchain analytics, AI, APIs) to enhance detection of illicit finance while supporting a risk-based approach that focuses resources efficiently.

OIRA

• Once OIRA clears the rule (typically 30–90 days),
• It will be published in the Federal Register for a standard 30–60 day public comment period, followed by a final rule and phased compliance implementation.
• The GENIUS Act sets aggressive timelines, with the overall framework becoming effective no later than January 18, 2027 (or 120 days after final rules from primary regulators).

International effect

• Major jurisdictions are aligning on core principles.

• The UK’s Financial Conduct Authority (FCA) has made stablecoin payments a priority for 2026, advancing authorisation, reserve, redemption, and AML/CFT requirements (including token freezing) that closely mirror U.S. standards to support interoperability and prevent regulatory arbitrage.
• Similar convergence is evident in the EU (MiCA), Hong Kong, Singapore, and Japan, driven by FSB and BIS coordination.

Implications:

• This rulemaking will impose the most significant federal AML/sanctions obligations on stablecoin issuers to date.
• PPSIs and stakeholders should prepare for enhanced compliance infrastructure, monitoring capabilities, and annual certifications.
• Public comments will help shape the final requirements, particularly regarding risk-based flexibility and technological innovation.

Longer read

1. Current Status of the Proposed Rule

• On March 23, 2026, the Financial Crimes Enforcement Network (FinCEN) submitted the proposed rule titled “Permitted Payment Stablecoin Issuers Anti-Money Laundering/Countering the Financing of Terrorism Program and Sanctions Compliance Program Requirements” (RIN 1506-ZA08 / TREAS-FINCEN) to the Office of Information and Regulatory Affairs (OIRA) for review under Executive Order 12866.
• This is the standard pre-publication step for significant Treasury/FinCEN rulemakings. No public text is available yet; OIRA review typically lasts 30–90 days before the rule proceeds to the Federal Register for notice-and-comment.*

2. Regulatory Basis: The GENIUS Act

The rule implements requirements in the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act), signed into law by President Trump on July 18, 2025 (Public Law 119-27).

Key provisions:

• Only Permitted Payment Stablecoin Issuers (PPSIs) may issue payment stablecoins in the United States.
• PPSIs are expressly classified as “financial institutions” under the Bank Secrecy Act (BSA).
• The Act mandates that Treasury (via FinCEN) issue tailored AML/CFT and sanctions compliance rules for PPSIs.
• Issuers must maintain programs “reasonably designed” to prevent money laundering, terrorist financing, and sanctions evasion, including token freezing/blocking capabilities for illicit activity.

FinCEN has publicly confirmed it is actively developing these rules to bring PPSIs fully within the BSA perimeter.

3. OIRA’s Role and Expected Timeline

OIRA reviews “significant” rules for:

• Statutory authority and consistency with law/Executive Orders
• Economic impact and cost-benefit analysis
• Compliance with procedural requirements

Once cleared,

• FinCEN will publish the NPRM in the Federal Register (expected within weeks to months).
• A standard 30–60 day public comment period will follow, after which FinCEN will issue a final rule. GENIUS Act deadlines put pressure on agencies to finalise implementing regulations promptly (the effective date is the earlier of January 18, 2027, and 120 days after final rules from primary regulators).

4. Likely Requirements of the Proposed Rule

Although the exact text remains under review, the GENIUS Act and FinCEN’s prior statements support a reliable inference of the core obligations. PPSIs will be required to implement:

A. Comprehensive AML/CFT Program (risk-based, per 31 U.S.C. § 5318(h)):

• Written program approved by senior management/board
• Customer Identification Program (CIP) and Customer Due Diligence (CDD/KYC)
• Ongoing monitoring of transactions (especially cross-border and high-risk stablecoin flows)
• Suspicious Activity Reporting (SARs)
• Recordkeeping
• Integration of FinCEN’s national AML priorities

B. Sanctions Compliance Framework (OFAC):

• Screening against SDN and other lists
• Token freezing/blocking capability for sanctioned/illicit activity
• Annual compliance certifications (within 180 days of approval and annually thereafter)

C. Risk-Based and Technology-Enabled Approach:

• FinCEN is emphasising risk-based programs that allow de-prioritisation of low-risk activity while focusing resources on the highest-risk stablecoin and cross-border flows.
• Expect encouragement of innovative tools (AI, blockchain analytics, APIs) for illicit finance detection, as directed by the GENIUS Act.
• These requirements align with (and expand upon) existing BSA obligations for money services businesses and banks.

5. What Happens Next (Standard & GENIUS-Specific Timeline)

1. OIRA completes review (expected 30–90 days from late March 2026).
2. FinCEN publishes NPRM in Federal Register → public comment period (typically 30–60 days).
3. FinCEN reviews comments and issues Final Rule (target: within GENIUS Act deadlines).
4. Compliance phase-in period for existing and new PPSIs.
5. Parallel supervision by primary regulators (OCC, FDIC, NCUA, state authorities) will incorporate these AML/sanctions rules.

• PPSIs that fail to implement compliant programs will face enforcement, including civil money penalties, cease-and-desist orders, or loss of permitted status.

6. International Alignment: What Other Jurisdictions May Do (e.g., UK) to Align

Major jurisdictions are moving rapidly toward harmonised stablecoin frameworks that mirror core GENIUS Act principles (1:1 reserve backing, redemption rights, issuer authorisation, and robust AML/CFT + sanctions compliance).

This reflects a global push for interoperability, consumer protection, and illicit-finance risk mitigation while enabling cross-border payments innovation.

The UK is a leading example of alignment with the U.S. model:

• UK (FCA / Bank of England): The FCA has designated stablecoin payments a top priority for 2026. It is finalising a comprehensive regime (building on consultations CP25/14 and CP25/15) that will require FCA authorisation for all UK-issued or circulating fiat-referenced stablecoins. Key alignments with GENIUS include:
• 1:1 reserve backing with high-quality liquid assets (with stricter central-bank deposit requirements for “systemic” stablecoins under BoE oversight).
• Mandatory AML/CFT programs, customer due diligence, transaction monitoring, SAR filing, and OFAC-style sanctions screening.
• Technical capability to freeze/burn tokens on lawful order.
• Redemption-at-par rights and monthly reserve disclosures.
• Sandbox testing open until January 18, 2026, for firms planning UK-issued stablecoins.

The UK explicitly references the GENIUS Act as a benchmark and is accelerating implementation to avoid regulatory arbitrage and support transatlantic interoperability. Secondary legislation is expected to take effect in 2026, with full prudential and conduct rules for both systemic and non-systemic stablecoins.

• Broader Global Convergence:
• EU (MiCA): Already in force; requires 1:1 reserves, authorisation, AML/CFT, and redemption safeguards—highly aligned with GENIUS on consumer protection and illicit-finance controls.
• Hong Kong, Singapore, Japan: All have or are finalising stablecoin ordinances mandating licensing, reserves, and AML programs; many explicitly reference U.S. and UK standards for “comparable” foreign regimes to gain market access.
• Trend: Regulators are coordinating via FSB and BIS to ensure mutual recognition of “comparable” supervision. Foreign issuers under GENIUS can access the U.S. market if their home regime meets the equivalence tests—thereby driving jurisdictions like the UK to tighten rules in 2026 to maintain competitiveness and avoid being deemed non-equivalent.

Implication for PPSIs:

• Expect increased pressure to implement multi-jurisdictional compliance programs (e.g., unified KYC/monitoring that satisfies both FinCEN and the FCA/BoE).
• Cross-border issuers should monitor the UK regime's finalisation in H1 2026 to identify alignment opportunities.

Summary & Key Takeaways

• The proposed FinCEN rule is the critical missing piece of GENIUS Act implementation (OCC/FDIC/NCUA rules cover licensing, reserves, and prudential standards; FinCEN covers AML/CFT/sanctions).
• This rulemaking will subject all PPSIs to robust, tailored BSA obligations for the first time at the federal level.
• Industry should prepare for enhanced KYC, monitoring, SAR filing, sanctions screening, and annual certifications.
• Stakeholders will have an opportunity to comment once published.
• Global alignment (especially UK 2026 regime) will facilitate smoother cross-border operations but require coordinated compliance strategies.

Top 10 Recommended Sources (Ranked by Authority & Relevance)

1. Congress.gov – Official Text of the GENIUS Act (S.1582)https://www.congress.gov/bill/119th-congress/senate-bill/1582/textThe definitive primary source for the full law, including provisions making PPSIs “financial institutions” under the BSA and mandating tailored AML/CFT and sanctions rules.
2. U.S. Treasury / FinCEN – GENIUS Act Illicit Finance Innovation Congressional Report (March 2026)https://home.treasury.gov/system/files/246/GENIUS-Act-Illicit-Finance-Innovation-Congressional-Report-March-2026.pdfOfficial Treasury report on innovative AML/CFT tools for stablecoins; directly relevant to what FinCEN’s proposed rule will likely emphasise.
3. Reginfo.gov – OIRA Pending Review of the FinCEN Proposed Rulehttps://www.reginfo.gov/public/do/eoDetails?rrid=1319565Official confirmation of the March 23, 2026 submission of the exact rule: “Permitted Payment Stablecoin Issuer Anti-Money Laundering/Countering the Financing of Terrorism Program and Sanctions Compliance Program Requirements” (RIN 1506-ZA07 or ZA08).
4. Brookings Institution – “Next Steps for GENIUS Payment Stablecoins” (March 2026)https://www.brookings.edu/articles/next-steps-for-genius-payment-stablecoins/Excellent, balanced analysis of the AML/CFT and illicit finance aspects of the GENIUS Act and upcoming FinCEN rules.
5. Steptoe – “The GENIUS Act and Financial Crimes Compliance”https://www.steptoe.com/en/news-publications/blockchain-blog/the-genius-act-and-financial-crimes-compliance-a-detailed-guide.htmlDetailed legal breakdown of AML/CFT obligations for PPSIs and expectations for FinCEN’s new rulemaking category.
6. White House Fact Sheet – President Signs GENIUS Act (July 18, 2025)https://www.whitehouse.gov/fact-sheets/2025/07/fact-sheet-president-donald-j-trump-signs-genius-act-into-law/Official summary of the Act’s key provisions, including BSA/AML treatment of stablecoin issuers.
7. FCA (UK) – Stablecoin Payments Priority for 2026https://www.fca.org.uk/news/press-releases/stablecoin-payments-priority-2026-fca-outlines-growth-achievementsPrimary UK regulator statement on accelerating stablecoin regime in 2026, with implicit alignment to U.S. GENIUS Act standards.
8. Gibson Dunn – “Global Stablecoin Rules in Focus” (PDF, March 2026)https://www.gibsondunn.com/wp-content/uploads/2026/03/global-stablecoin-rules-in-focus-a-cross-border-guide-to-the-new-era-of-stablecoin-regulation.pdfStrong cross-border comparison, including U.S. AML/sanctions requirements and how jurisdictions like the UK are aligning.
9. Morrison & Foerster (MoFo) – Cross-Border Developments: UK vs U.S. Stablecoin Frameworkshttps://www.mofo.com/resources/insights/251204-cross-border-developments-a-comparisonUseful comparison of UK and U.S. regimes, highlighting potential alignment on AML/CFT and sanctions.
10. LinkedIn Post by Jim Richards (March 2026) – Detailed Commentary on FinCEN’s OIRA Submissionhttps://www.linkedin.com/posts/richards1_stablecoin-anti-money-laundering-aml-and-activity-7442277446122627072-okYcTimely, expert-level breakdown of the exact FinCEN rule title, OIRA process, and unique sanctions program requirement for PPSIs.