FinCEN Adopts Rule Extending AML/CFT Requirements to RIAs and ERAs, Further Increasing Regulatory Obligations on Investment Advisers

On August 28, 2024, the Financial Crimes Enforcement Network (FinCEN) adopted a final rule that extends anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to certain types of investment advisers (the Final Rule), and delegates to the U.S. Securities and Exchange Commission (SEC) the authority to examine investment advisers’ compliance with these obligations.  The Final Rule ends a long-running debate over whether to subject investment advisers to AML/CFT obligations after multiple prior proposals to do so had stalled.  

The Final Rule imports standards and requirements that will be familiar to investment advisers affiliated with financial institutions already subject to AML/CFT obligations, but may be new to smaller and independent investment advisers.  For these entities, the compliance uplift required could be substantial.

The Final Rule is substantially similar to FinCEN’s initial proposal (the Proposed Rule) released in February (which we discuss here).  However, some modifications are noteworthy, including that the Final Rule clarified the scope of investment advisers subject to its requirements and did not adopt a proposal that investment advisers’ AML/CFT program must be performed by persons in the U.S.  Absent further developments, the compliance date for the Final Rule is January 1, 2026.

The Final Rule is separate from two other pending proposals that could affect investment advisers’ AML/CFT requirements—a joint rule proposed by FinCEN and the SEC that would require investment advisers to implement a customer identification program (CIP) (which we discuss here) and a comprehensive proposal by FinCEN to update the AML/CFT program requirement generally (which we discuss here).  Although changes could result from these proposals, investment advisers would do well to begin assessing their readiness to comply with the Final Rule sooner than later, especially those that are not affiliated with financial institutions already subject to comprehensive AML/CFT compliance requirements. 

Read our overview of how the Final Rule would apply to investment advisers here.

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