FinCEN to Delay Rule Applying AML/CFT Requirements to Investment Advisers
Commentary by Andrew Lom
FinCEN will postpone the effective date of the 2024 final rule establishing AML/CFT program and SARs filing requirements for SEC-registered investment advisers ("RIAs") and exempt reporting advisers ("ERAs").
The rule, originally scheduled to take effect on January 1, 2026, is now expected to take effect on January 1, 2028. FinCEN said it also plans to revisit the scope of the rule at a future date.
The final rule, issued by FinCEN on September 4, 2024, defined investment advisers, specifically RIAs and ERAs as "financial institutions" under the Bank Secrecy Act. This definition subjected these advisers to requirements for establishing and implementing anti-money laundering and countering the financing of terrorism programs; filing suspicious activity reports and currency transaction reports; conducting ongoing customer due diligence; and complying with recordkeeping and information-sharing obligations. The rule excluded certain RIAs, such as those registered solely due to mid-size or multi-state status, pension consultants and those reporting zero assets under management.
Commentary
Even with this extension and potential change in scope, nearly all investment adviser clients are already captured by current AML/CFT regulations when they open bank and brokerage accounts, or invest in mutual funds and other investment products, through which they and/or the adviser implement investment decisions in the course of their relationship. It is unclear how much protective value would be added by an additional layer of screening conducted by the investment adviser.
Related Articles
-
The Department of the Treasury's Financial Crimes Enforcement Network and the SEC jointly proposed a rule that would require SEC-registered investment advisers and exempt reporting advisers to establish, document and maintain written customer identification programs.
-
FinCEN proposed to include "investment adviser" in the definition of "financial institution" under the Bank Secrecy Act. The proposed rule would require advisers to implement AML/CFT programs and maintain recordkeeping requirements.