Deciphering FinCEN’s New Anti-Money Laundering Rules for Advisers

On August 28, 2024, the US Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) adopted a final rule that subjects investment advisers to anti-money laundering/countering the financing of terrorism (AML/CFT) programs and related reporting requirements, including suspicious activity reports.

Specifically, the Final Rule does the following:

• Requires certain registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to establish AML/CFT programs and prescribes minimum standards for such programs
• Requires those RIAs and ERAs to report suspicious activity to FinCEN
• Requires those RIAs and ERAs to comply with the Recordkeeping and Travel Rules
• Requires those RIAs and ERAs to comply with certain obligations applicable to “financial institutions” subject to the Bank Secrecy Act and the Bank Secrecy Act’s implementing regulations, such as special information sharing procedures and special due diligence requirements for correspondent and private banking accounts
• Delegates examination authority to the US Securities and Exchange Commission

FinCEN’s fact sheet accompanying the Final Rule states that the rule “aims to help address the illicit finance risks in the investment adviser sector in the United States, which [Treasury] documented in a February 2024 risk assessment.”

In the Adopting Release, FinCEN placed significant focus on the private funds industry (and private fund advisers) as a potential entry point for illicit finance activity that threatens national security. FinCEN explained that investment advisers and their private funds, particularly venture capital funds, are being used by foreign states to access certain technology and services with long-term national security implications through investments in early-stage companies.

In the Final Rule, FinCEN largely adopts the substance of the proposed rule that FinCEN issued earlier this year (Proposed Rule), discussed in our prior report. Certain material changes from the Proposed Rule include a narrowing of the Proposed Rule with respect to (1) the types of investment advisers subject to the Final Rule, (2) the scope of applicability of the Final Rule to foreign-located investment advisers, and (3) the scope of applicability of the Final Rule to subadvisers. That being said, FinCEN adopted the minimum requirements of AML/CFT programs largely as proposed. 

The date for compliance with the requirements of the Final Rule is January 1, 2026.