Treasury Issues Final AML Rules for Financial Advisers

The Financial Crimes Enforcement Network (“FinCEN”), part of the U.S. Department of the Treasury, issued wide-ranging new anti-money-laundering rules that directly impact investment advisers for the first time in AML history. The rules, which are slated to take effect in early 2025, are intended to further narrow criminals’ opportunities to launder their ill-gotten gains through legitimate channels within the U.S. financial system. The rules also apply in certain contexts to real estate agents. FinCEN’s announcement is here, and a fact sheet specific to investment advisers is here.

Key takeaways for investment advisers include:

• The rules apply to investment advisers who:
  • are registered with the SEC, so-called RIAs
  • advisers who are required to do so
  • advisers that report information to the SEC as exempt reporting advisers (ERAs)
• The rules require covered advisers to:
  • implement a risk-based and reasonably designed AML/CFT program
  • file certain reports, such as Suspicious Activity Reports (SARs), with FinCEN
  • keep certain records, such as those relating to the transmittal of funds (i.e., comply with the Recordkeeping and Travel Rules)
  • fulfill certain other obligations applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations, such as special information sharing procedures

Both the financial advisory and real estate industries pushed backed when earlier versions of the rules were proposed, and Treasury acceded to some of their feedback, as reported in the Wall Street Journal. 

Momentum for the new rules was spurred by instances of Russian oligarchs investing in U.S. startups through venture capital funds and sending millions of dollars to their American-based children to purchase real estate with their criminal proceeds.

Certain categories of investment advisers will be required to screen for and report their clients’ suspicious activity. Smaller and family-based advisers are exempted from the new mandates.

The new rules represent some of the most significant expansions of the country’s AML rules in decades. Treasury Secretary Janet Yellen commented that the new rules “will make it harder for criminals to exploit our strong residential real estate and investment adviser sectors.”

Learning the ins and outs of these new rules will be critical as investment advisers and their firms work to ensure strict compliance with the regime.

If you are an investment adviser or a compliance professional who wants to learn more about how these rules are likely to work in practice, and how to stay on the right side of the law, please contact a regulatory defense attorney at The Galbraith Law Firm by emailing inquiry@galbraithlawfirm.com or calling 212.203.1249, for a free confidential consultation.