By Alyssa Barcheers, Managing Director, U.S.
In August 2024, the U.S. Financial Crimes Enforcement Network (FinCEN) finalized a rule that has been anticipated since the passage of the USA PATRIOT Act in 2001. Starting on January 1, 2026, SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) will be required to implement formal anti-money laundering and countering the financing of terrorism (AML/CFT) programs.
For decades, banks and broker-dealers have operated under strict AML requirements. The new rule from FinCEN brings investment advisers into the fold, with obligations to monitor transactions, conduct due diligence checks, and file suspicious activity reports (SARs), just as other regulated financial institutions are required to do under the Bank Secrecy Act.
If you’re an investment adviser, now is the time to prepare your AML policies, internal controls, and reporting procedures to get ahead of these changes. In this article, we’ll cover what you need to know to comply.
What’s changing for investment advisers?
Under the new FinCEN rule, SEC-registered RIAs and ERAs must implement and maintain active AML and CFT programs. These programs are designed to detect and prevent money laundering, terrorist financing, and other illicit activities.
To comply, investment advisers will need to:
- Establish and maintain a formal AML program with clear policies and procedures
- Conduct ongoing customer due diligence (CDD), including client identity verification and risk assessments
- File certain reports, such as Suspicious Activity Reports (SARs), with FinCEN for transactions that raise red flags
- Undergo independent compliance testing to ensure effective controls
- Maintain detailed records of certain financial transactions, such as cross-border transfers and large cash transactions
- Train employees on AML warning signs and reporting obligations
For investment advisers who haven’t had to comply with formal AML rules before, this shift marks a significant operational change. With only a few months before changes take effect, now is the time to familiarize yourself with updated FinCEN requirements and shore up internal procedures accordingly.
What investment advisers are required to do
As FinCEN’s updated rule takes effect in January 2026, investment advisers have less than a year to build out an updated AML program.
To stay compliant, firms should:
1. Implement a formal AML program
Investment advisers must establish risk-based policies and procedures to prevent financial crimes, including screening clients, monitoring transactions, and flagging suspicious activity.
Your AML program should include:
- An appointed AML Officer: A designated internal person responsible for program oversight
- Independent compliance testing: Regular AML compliance testing performed by an independent party, not your AML Officer
- Ongoing training: Train employees to recognize suspicious activity and understand their responsibilities under the new FinCEN rules
- Ongoing customer due diligence: Verify client identities, assess risk levels, and continuously monitor transactions for potential money laundering activity
2. File Suspicious Activity Reports (SARs)
If an adviser “knows, suspects, or has reason to suspect” that a transaction involves illicit activity, they must report it to FinCEN. Even attempted suspicious transactions are subject to this rule.
3. Maintain comprehensive AML records
Advisers must keep detailed records of certain financial transactions, including:
- Cross-border transfers and extensions of credit over $3,000
- Currency transactions over $10,000
Why now is the best time to act
FinCEN’s updated rule isn’t just another regulatory update—it’s a major shift that brings investment advisers under the same AML rules as broker-dealers and banks. Advisers who don’t comply by January 2026 could face regulatory penalties and enforcement actions, increased scrutiny from investors and institutional LPs, and reputational damage.
How IQ-EQ can help
FinCEN’s new rules will create operational challenges for many investment advisers, but you don’t have to tackle them alone. Our dedicated AML and Regulatory Compliance departments will design and implement a compliant AML program tailored to your firm’s needs. Our experts can develop customer risk profiles, lead ongoing compliance training, and conduct independent testing.
