What You Need to Know Now to Comply by January 1, 2026

By: Tom Scriven and Aaron Bourke

Denver, Colorado – On August 28, 2024, the Financial Crimes Enforcement Network (FinCEN), a bureau within the United States Department of the Treasury, issued a final rule (the Rule)[i] extending anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations to certain investment advisers. This Rule, effective January 1, 2026, marks a significant expansion of the Bank Secrecy Act (BSA) framework, aiming to close regulatory gaps and enhance the integrity of the U.S. financial system.​

Given the recent change in administrations and change in leadership of the SEC, the industry is hoping for relief from some of the Rule’s more onerous requirements and/or a delay in its effective date. The Investment Adviser Association (IAA), for example, has asked for the comment period to be reopened for the Rule and a proposed Rule related to customer identification programs (discussed below). We will continue to monitor these developments closely as they may impact implementation timelines and requirements.  This article assumes that the Rule will go into effect on January 1, 2026, as currently planned.

Who Is Covered?​

The Rule applies to:​

• Registered Investment Advisers (RIAs): Those registered or required to register with the Securities and Exchange Commission (SEC) under Section 203 of the Investment Advisers Act.​
• Exempt Reporting Advisers (ERAs): Advisers exempt from SEC registration under Sections 203(l) or 203(m) but still required to file reports with the SEC.​

Notably, the Rule expressly does not apply to:​

• RIAs registered solely due to their status as Mid-Sized Advisers[ii], Multi-State Advisers[iii], or pension consultants.​
• RIAs not reporting any assets under management (AUM) to the SEC on Form ADV.​
• State-registered investment advisers, (at least at this time, noting that FinCEN stated that it will continue to monitor illicit finance activity involving such advisers to evaluate the need for appropriate steps to counter such activity).

For “foreign-located investment advisers” (RIAs and ERAs that have their principal office and place of business outside the United States), the requirements apply only to their advisory activities that:

• Take place within the United States, including through the involvement of U.S. personnel of the investment adviser, such as the involvement of an agency, branch, or office within the United States; or
• Provide services to a U.S. person or a foreign-located private fund with an investor that is a U.S. person.

Foreign-located investment advisers are required to maintain and make available records related to the scope of their activities covered by the Rule.

FinCEN does not specify whether the Rule applies to exempt reporting advisers that report only to a U.S. state; however, the Rule expressly states that state-registered investment advisers are exempt. It is possible that FinCEN will provide further clarification on this point prior to the effective date of the FinCEN AML/CFT Rule.

Key Compliance Requirements

The Rule will be effective January 1, 2026. By this date, covered investment advisers must comply with the following requirements:

Written AML/CFT Compliance Program

Covered investment advisers must implement a written AML/CFT compliance program which has been approved by the adviser’s board of directors or members (or its sole proprietor, general partner, or trustee), which includes:​

• Internal Policies and Controls: Designed to prevent money laundering, terrorist financing, and other illicit activities.​
• Independent Testing: Regular assessments of the program’s effectiveness, conducted by internal personnel or qualified external parties.​
• Designated Compliance Officer: A person responsible for overseeing and implementing the AML/CFT program.​
• Ongoing Training: Regular AML/CFT training for relevant personnel.​
• Customer Due Diligence (CDD): Risk-based CDD procedures to (a) understand the nature and purpose of customer relationships to develop a customer risk profile and (b) conduct ongoing monitoring to identify and report suspicious transactions and maintain and update customer information.​

• FinCEN intends that future Rulemaking will address additional elements of CDD.

BSA’s Recordkeeping and Travel Rules

In addition to the requirements summarized in the bullets above, advisers must comply with the BSA’s Recordkeeping and Travel Rules, maintaining records related to fund transmittals and ensuring that certain information accompanies transmittals of funds to the next financial institution in the payment chain.​

Suspicious Activity Reporting

Covered investment advisers are required to file Suspicious Activity Reports (SARs) for transactions involving or aggregating at least $5,000 that are conducted or attempted by, at, or through an investment adviser and that are suspected to involve funds or other assets derived from illegal activities or attempts to hide such funds.​

Additional Compliance Requirements:

In addition to the above requirements, covered investment advisers also must:

• Comply with the information sharing provisions under sections 314(a) and 314(b) of the USA PATRIOT Act. These provisions require advisers to search their records for accounts and transactions of persons that may be involved in terrorism or money laundering upon request from FinCEN, and allow voluntary information sharing among financial institutions with the goal of identifying and reporting money laundering and terrorist activities.

When responding to a section 314(a) request for a private fund, an investment adviser generally would respond for the fund and not for the underlying investors in the fund (unless the adviser has a separate relationship with one or more of such investors directly).

• File currency transaction reports (CTRs) for transactions in currency over $10,000.
• Comply with special due diligence and special measures to deter money laundering and terrorist activity applicable under sections 311 of the USA PATRIOT ACT.
• Comply with the special due diligence requirements related to correspondent accounts for foreign financial institutions and private banking accounts.

Delegation and Oversight

While advisers may delegate aspects of their AML/CFT programs to third parties, including foreign-located service providers, they remain fully responsible for compliance. Delegation must be formalized through contractual agreements, and advisers must ensure that FinCEN and the SEC can access relevant information and records.​ Further, the AML/CFT officer must be an employee of the investment adviser or its affiliate, not a third-party contractor or consultant.

Exclusions and Special Considerations

The Rule allows advisers to exclude certain entities from their AML/CFT programs, including:​

• Mutual funds already subject to BSA requirements.​

• Collective investment funds that are subject to the requirements of 12 CFR 9.18 (relating to the establishment and operation of collective investment funds by national banks acting in a fiduciary capacity), or other applicable law that incorporates these requirements, and
• Bank- and trust company-sponsored collective investment funds complying with specific regulatory standards.​
• Other investment advisers subject to the final Rule that are advised by the covered adviser.​

In these cases, advisers are not obligated to verify the AML/CFT compliance of the excluded entities.​

Next Steps for Investment Advisers

Given the January 1, 2026, compliance deadline, investment advisers should:​

• Assess whether they fall within the scope of the Rule.​
• Develop or update AML/CFT compliance programs to meet the new requirements.
• Train relevant personnel on AML/CFT obligations and procedures.
• Establish processes for ongoing customer due diligence and suspicious activity monitoring.
• Review and, if necessary, formalize delegation arrangements with third-party service providers.​

If you have questions about how the final Rule applies to your business or would like assistance designing and implementing a compliant AML program, please reach out to an RPCK Rastegar Panchal LLP team member.

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[i] The final rule is available here.

[ii] “Mid-Sized Advisers” are defined in the Rule as RIAs who have AUM between $25 million and $100 million and are registered with the SEC but who either: (i) are not required to be registered as an adviser with the state securities authority in the state where they maintain their principal office and place of business; or (ii) are not subject to examination as an adviser by the state in which they maintain their principal offices and places of business. Currently, only advisers whose principal office and place of business is in New York and who have AUM between $25 million and $100 million would qualify for the exemption provided for in clause (ii).

[iii] “Multi-State Advisers” are advisers who would otherwise be required to register in more than 15 states, but have less than $100 million in AUM, and choose instead to register with the SEC.