FinCEN Proposes Two-Year Delay to Investment Adviser AML Rule
Commentary by Thomas Delaney
The Financial Crimes Enforcement Network ("FinCEN") proposed postponing 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. In July 2025, the Treasury Department announced its intent to postpone the rule and revisit its scope at a later date. (See related coverage.) The following month, FinCEN issued an exemptive relief order to provide regulatory certainty ahead of this formal proposal.
The final rule, issued on September 4, 2024, defined RIAs and ERAs as "financial institutions" under the Bank Secrecy Act. This designation subjects covered advisers to requirements to establish AML/CFT programs, file SARs and currency transaction reports, conduct ongoing customer due diligence, and comply with related recordkeeping and information-sharing obligations. Certain advisers, such as those registered solely due to mid-size or multi-state status, pension consultants, and those reporting zero assets under management, remain excluded.
In the proposal, FinCEN explained that the two-year delay is intended to (i) assess whether the rule is properly tailored to diverse investment adviser models and risk profiles, (ii) reduce duplicative regulatory burdens, and (iii) balance compliance costs with regulatory benefits. FinCEN estimated that the postponement will save about $1.45 billion in compliance costs across 2026–2027. FinCEN rejected alternatives—such as retaining the January 2026 date, aligning with other regulatory timelines, or giving small entities extra time—concluding that a uniform delay best balances risks and costs without creating loopholes.
Comments on the proposed delay are due by October 22, 2025.
Commentary
Halloween is around the corner and the whistling sound you may be hearing is that of registered investment advisers who, for the third time since the passage of the USA Patriot Act, have once again whistled past the graveyard of AML regulation that has long applied to banks, broker dealers, insurance companies, and other RIAs affiliated with banks. Registered investment advisers to private equity, venture capital, and hedge funds will have two more years to convince FinCEN that expanded regulation is not needed to thwart the money laundering risk FinCEN was worried about in those sectors when it proposed AML requirements for covered advisers in early 2024. Perhaps the CFTC exchanges might want to provide for an event contract on the likelihood of further AML regulation being applied to RIAs in 2028.
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