Treasury Department Delays AML Rule Implementation for Investment Advisors 

The U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) has suspended the potential date of the final rule for its anti-money laundering rule, targeted at investment advisors, until January 1, 2028. 

FinCEN’s decision to delay the implementation, which was formally introduced under the Biden Administration, comes as the division plans to “revisit the scope” of the IA AML rule to “ensure efficient regulation that appropriately balances costs and benefits,” FinCEN said. 

“The IA AML Rule seeks to address ongoing illicit finance risks, threats, and vulnerabilities posed by criminals and foreign adversaries that exploit the U.S. financial system and assets through investment advisers,” the organization said. “FinCEN also recognizes that extending the effective date of the rule may help ease potential compliance costs for industry and reduce regulatory uncertainty while FinCEN undertakes a broader review of the IA AML Rule.” 

The rule’s implementation would subject RIAs, which are registered with the SEC, to the regulations under the Bank Secrecy Act. Furthermore, RIAs will be required to report any suspicious activity to the FinCEN.  

Despite the rescheduling of the IA AML ruling, investment advisors will still be required to prepare themselves for the finalized rule at a later, undisclosed date.  

Once the rule has been adopted, investment advisors will have to comply with the final rules within 12 months after it becomes effective. 

In 2015, the Treasury Department proposed a rule that would have applied AML requirements to hedge funds, private equity managers, and select investment advisors.  

In light of the rule, advisors have widely criticized the Treasury’s proposed rules regarding halting money laundering and terrorism financing within the RIA industry. 

Last April, the Investment Adviser Association’s general counsel Gail Bernstein, called for an exemption for low-risk advisors and investors from the proposed rules, citing that “the BSA does not need to be extended to all investment advisors with respect to all of their activities in order to have a comprehensive AML [Ant-Money Laundering] regime in the U.S.”