Treasury Unveils Final Anti-Money Laundering Rules for RIAs

The U.S. Treasury Department finalized new anti-money-laundering rules affecting U.S. Securities and Exchange Commission-registered investment advisers. Its Financial Crimes Enforcement Network, or FinCEN, unveiled two final rules yesterday to combat money laundering: one for investment advisers and exempt reporting advisers, and one for residential real estate advisers.

The rule designates RIAs and exempt reporting advisers as “financial institutions” under the Bank Secrecy Act and subjects them to anti-money laundering and countering the financing of terrorism, or AML/CFT, program requirements. As previously reported by The DI Wire, the proposed rule unveiled in February 2024 cited a Treasury risk assessment that identified that the investment adviser industry has served numerous times as an entry point into the U.S. market for illicit proceeds associated with foreign corruption, fraud, tax evasion, and other criminal activities.

The requirements have long been applicable to banks, broker-dealers, and mutual funds. Earlier in the year, Gary Gensler, SEC chair, expressed support for the proposal.

“The proposed rule is designed to make it more difficult to use false identities to establish customer relationships with investment advisers,” said Gensler. “I support this proposal because it could reduce the risk of terrorists and other criminals accessing U.S. financial markets to launder money, finance terrorism, or move funds for other illicit purposes.”

The proposed rule was previously shared on SEC.gov and published in the Federal Register. It closed on July 22, following 36 comments offered to FinCen and the SEC.

In the final rule, FinCEN narrowed the scope of investment advisers affected; advisers that are “mid-sized,” “multi-state,” and “pension consultants,” as well as RIAs not required to report assets under management to the SEC are excluded from the rule. As with the proposal, the rule doesn’t apply to state-registered advisers.

However, those impacted must implement a “risk-based and reasonably designed” AML/CFT program, file suspicious activity reports with FinCEN, and keep particular records “such as those relating to the transmittal of funds.”

The Investment Adviser Association – the trade organization representing RIAs – was critical of yesterday’s final rule. In a statement on its website, IAA said that although it fully supports efforts to combat money laundering and terrorist financing, “additions to the current robust U.S. AML regulatory regime must be risk-based and designed to fill identified gaps in the existing landscape rather than duplicate the protections that already exist.”

Its own recommendations called for changes that it believes would better target the rule’s scope and impact.

“Based on our preliminary assessment of the final rule, while we note that the [Treasury Department] made several changes to the proposal, which are responsive to some of the IAA’s requests, the rule was adopted largely as proposed. The IAA believes that the final rule is too prescriptive in certain of its specific requirements, which will make it more difficult for advisers to tailor their programs accordingly. The final rule will also impose undue burdens on smaller firms,” said IAA.

John Grady, co-chair of ADISA’s Legislative and Regulatory Committee, shared additional commentary.

“[The Alternative & Direct Investment Securities Association] certainly appreciates the goal of this rule – to ensure that bad actors are less able to access our financial system to launder money or finance terrorist activities,” said Grady. “We agree, however, with the criticism voiced by many that this extension of the Bank Secrecy Act to investment advisers is overbroad and not likely to achieve the desired effect. The types of accounts that this action impacts – in particular, funds with substantial limitations on shareholder liquidity – should not be very attractive vehicles for organizations seeking to finance illegal activities. In many cases, moreover, these vehicles already have meaningful AML/CFT programs in place that apply to potential and existing investors.”

“The types of accounts that this action impacts – in particular, private funds and other vehicles with substantial limitations on shareholder liquidity – are not typically attractive vehicles for organizations seeking to launder money or finance illegal activities. In many cases, moreover, these vehicles already have meaningful AML/CFT programs in place that apply to potential and existing investors,” concluded Grady.

Firms have until Jan. 1, 2026, to comply with the final rule. Since mutual funds already fall under the Bank Secrecy Act, RIAs would not have to fulfill AML/CFT requirements for those funds they advise.

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