Evolving AML Landscape

With FinCEN’s new anti-money laundering (AML) rule¹ scheduled to go into effect January 1, 2026, registered investment advisers (RIAs) and exempt reporting advisers (ERAs) should prepare now by assessing their current AML controls and proactively exploring ways to strengthen those controls.

The Bank Secrecy Act (BSA) is the foundation of AML regulations in the U.S.² This Act requires financial institutions to implement measures to detect and prevent money laundering and terrorist financing. The USA PATRIOT Act expanded these obligations by requiring Customer Identification Programs (CIP), Know Your Customer (KYC) procedures, and Suspicious Activity Report (SAR) filings³. While broker-dealers have long been subject to AML rules enforced by the SEC and FINRA, RIAs have traditionally not been directly subject to these requirements.

As a result, RIAs have traditionally relied on third-party service providers, such as custodians and broker-dealers, for AML oversight. However, FinCEN’s new rule marks a significant shift and will extend AML program requirements directly to RIAs and other ERAs. These new requirements include:

• Establishing formal AML policies and procedures.
• Training staff on new compliance requirements.
• Assigning a dedicated AML compliance officer and conducting independent audits.
• Ensuring contracts with third parties reflect updated compliance obligations.
• Enhanced recordkeeping requirements.
• Mandatory SAR filings and beneficial ownership disclosures.
• Strengthening due diligence measures by:
  • Enhancing identity verification protocols.
  • Conducting risk assessments.
  • Implementing ongoing transaction monitoring for suspicious activities.

Notably, the SEC has already taken enforcement action against RIAs for failing to effectively implement self-adopted AML due diligence policies and procedures, even before the AML Rule’s effective date. Once the AML Rule goes into effect, the SEC and FinCEN are expected to increase enforcement efforts against RIAs who fail to implement reasonably designed AML compliance programs. Non-compliance may result in not only regulatory fines and penalties but also reputational damage and a loss of client trust.

While industry groups have requested a postponement of the AML Rule’s compliance effective date⁴, RIAs and ERAs should proceed under the assumption that the Rule will go effective as scheduled. Many advisers, particularly those with limited in-house compliance resources, are expected to struggle adjusting to these new requirements⁵. Accordingly, RIAs and ERAs should take the opportunity now to conduct gap analyses identifying any weaknesses in their AML programs and implement continuous education programs to keep employees informed of evolving AML requirements as well as emerging risks.

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Written by Kelsey Janas

Footnotes

1. Financial Crimes Enforcement Network: Anti-Money Laundering/Countering the Financing of Terrorism, 89 Fed. Reg. 67890 (Sept. 4, 2024), https://www.federalregister.gov/documents/2024/09/04/2024-19260/financial-crimes-enforcement-network-anti-money-launderingcountering-the-financing-of-terrorism

2. Bank Secrecy Act, 31 U.S.C. §§ 5311–5332.

3. Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001, Pub. L. No. 107-56, 115 Stat. 272.

4. ​Investment Adviser Association, IAA’s Concerns Regarding New AML and CIP Rules for Investment Advisers (Jan. 31, 2025), https://www.investmentadviser.org/resources/iaas-concerns-regarding-new-aml-and-cip-rules-for-investment-advisers/.

5. Ian Wenik, RIAs Struggling to Comply with AML Rule Before Deadline, Citywire RIA (Mar. 6, 2025), https://citywire.com/ria/news/rias-struggling-to-comply-with-aml-rule-before-deadline/a2461168.