The AML Final Rule: Investment Advisers Enter a New Era of Regulatory Scrutiny

[Update: In July 2025, FinCEN announced that adoption of the IA AML Rule has been delayed until January 1, 2028. Read more on this here]

Effective January 1, 2026, certain SEC Registered Investment Advisers (RIAs) and Exempt Reporting Advisers (ERAs) who are subject to mandatory report filings with the SEC,[1] will be required to adhere to the final Anti-Money Laundering (AML) Rule. The rule was adopted on February 13, 2024, by the Financial Crimes Enforcement Network (FinCEN) under the Bank Secrecy Act (BSA) to tackle money laundering and countering financing of terrorism (CFT).

This Rule indicates a shift in policy, expanding compliance requirements to groups previously excluded, such as private fund advisers.

Scope and Applicability: Who Must Comply?

As noted above, certain entities previously excluded now fall under the classification of “Financial Institutions” under the BSA and are required to implement adequate AML policies.

The Final AML Rule generally applies to two categories of advisers:

• Investment advisers registered with the SEC, and
• Exempt reporting advisers (ERAs) who are required to file reports with the SEC such as:
  • Venture Capital fund advisers
  • Some Private fund advisers

[1] Please note that the AML Rule does not apply to mid-sized advisers, multi-state advisers, pension consultants, state registered investment advisers, foreign private advisers and family offices.

Building a Compliant AML/CFT Program

Advisers subject to the Final Rule must develop and implement a comprehensive, risk-based AML/CFT program that addresses the core pillars of the BSA which include:

1. Written Policies, Procedures, and Internal Controls
   • Develop and implement written AML policies tailored to the size of the firm and risk exposure
   • Adopt effective protocols to ensure policies are followed adequately
   • Take steps to ensure that internal controls address ongoing customer due diligence, to include development of a customer risk profile, monitoring for suspicious transactions, and updating customer information as needed

2. Designation of an AML Compliance Officer
   • Appoint a knowledgeable and competent Compliance Officer to oversee the firm’s AML compliance efforts
   • Ensure that the AML Compliance Officer has sufficient authority and resources

3. Other AML Program Requirements

• Filing of certain Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs) with FinCEN
• Fulfilling recordkeeping requirements related to the transmittal of funds and special information sharing protocols
• Independent testing of the AML program (which could be performed internally by qualified staff or a third-party provider) to assess effectiveness.

Note: while advisers can contractually delegate the implementation of the AML/CFT Program, they will remain liable for satisfying the regulatory compliance requirements.

4. Ongoing Employee Training
   • Ongoing AML training should be provided for staff and other members of the firm, and tailored to the staff’s role at the firm
     • Training should address how to detect suspicious activity, identify potential areas of concern, and guidance on how to follow protocol when red flags arise
     • Staff training should be documented and updated regularly

Notably, the AML Final Rule does not currently include a requirement for a formal Customer Identification Program (CIP), however, that may change based on a May 2024 FinCEN proposal to adopt CIP rules for advisers in the near future. Jacko Law Group is paying close attention to any developments.

Please note that the obligations are mandates for entities who fall under the new Final AML Rule bucket.

1. Suspicious Activity Reports (SARs)

Under the new rule, covered investment advisers will be required to file Suspicious Activity Reports (SARs) with FinCEN for transactions involving $5,000 or more that are deemed suspicious, such as those potentially involving fraud, money laundering, or other illicit activity, based on internal risk indicators and monitoring protocols.

*Advisers have 30 calendar days from the initial date of detection to file a report.

2. Currency Transaction Reports (CTRs)

In addition to SARs, covered IAs and ERAs will also be required to file Currency Transaction Reports (CTRs) with FinCEN for any transactions in a single business day, that exceeds $10,000. This includes numerous related transactions that, combined, exceed the threshold of $10,000.

*CTRs must be filed within 15 calendar days of the transaction

3. Travel Rule (Fund Transfers)

Covered IAs and ERAs are required under the Final AML Rule to retain and transmit information about fund transfers of $3,000 or more, including identifying information of the fund transfer originator, account number, amount and date of the transfer, and information on the beneficiary. The information must be available if requested.

4. Information Sharing Requirements (Section 314(a) and 314(b))

Under the Final AML Rule, specified IAs and ERAs must adhere to the USA PATRIOT Act for sharing information related to terrorism. Under Section 314 (a). Those included under the new rule are required to respond to information requests from law enforcement concerning parties suspected of engaging in terrorist financing or money laundering. Participating is mandatory when a request has been received.

Section 314(b) allows covered institutions to voluntarily share information with one another to track, identify and report suspicious activity. If a firm wishes to participate, they must register with FinCEN and ensure they have adequate systems in place to protect shared data.

Client Download

AML Reporting and Recordkeeping Obligations Matrix

Conclusion

The Final AML Rule indicates a shift in regulatory focus, showing that AML compliance is not optional or pertinent only to select large financial institutions but is a core priority for a large (and growing) sector of the financial services industry.

The deadline for compliance is January 1, 2026 and firms are advised to begin preparing now by identifying gaps, building adequate infrastructure, and ensuring internal policies and procedures meet the expectations of FinCEN and the SEC.

Jacko Law Group works with firms to implement a robust AML compliance program tailored to firms’ needs. For more information, please contact us at 619.298.2880.

Author: Michelle L. Jacko, Managing Partner, Jacko Law Group, PC (“JLG).

JLG works extensively with investment advisers, broker-dealers, investment companies, private equity and hedge funds, banks, and corporate clients on securities and corporate counsel matters, including succession planning. For more information, please visit https://jackolg.com/.

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