Department of the Treasury Releases New AML/CFT Rule for Investment Advisers

Who may be interested: Investment Advisers

Quick Take: The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a final rule subjecting certain registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to anti-money laundering and countering the financing of terrorism (AML/CFT) requirements that largely track the requirements applicable to other covered financial institutions.

The final rule updates the definition of a covered financial institution” in FinCEN’s AML regulations to include all RIAs and ERAs, except for RIAs that are:

1. Not required to report any assets under management to the SEC on Form ADV;
2. Registered as “mid-sized advisory firms” (i.e., an RIA with regulatory assets under management of $25-$100 million that is not subject to a state’s registration and examination regime);
3. Registered solely as pension consultants; or
4. Registered solely as “multi-state advisers”.

Investment advisers covered by the final rule will be required to implement a risk-based and reasonably designed AML/CFT program (AML Program) that includes written policies, procedures, and internal controls and requires the appointment of an AML Compliance Officer. In addition, covered advisers will be required to conduct regular risk assessments and independent testing of their AML Program. Additional requirements also include:

1. Transaction monitoring and filing Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) with FinCEN when required;
2. Complying with the Recordkeeping and Travel Rules, which require creation and retention of, among other things, records for transmittals of funds of $3,000 or more;
3. Satisfying additional due diligence requirements for correspondent and private banking accounts;
4. Complying with special measures under Section 311 of the PATRIOT Act; and
5. Sharing certain additional information with FinCEN, law enforcement, and other financial institutions as required by Section 314 of the PATRIOT Act.

The final rule excludes mutual funds from the requirements of a covered adviser’s AML Program requirements. Further, the final rule does not require an investment adviser to implement a customer identification program (CIP), nor does it require advisers to collect beneficial ownership information from their legal entity customers. However, the CIP requirement is being addressed through joint FinCEN/SEC rulemaking and is expected to be adopted in the near future.

Covered Advisers will be required to comply with the final rule beginning on January 1, 2026.

FinCEN’s adopting release can be found here. For a more detailed discussion of the final rule, see S&K’s Client Alert here.