Investment advisers have long operated in a regulatory gray zone on AML compliance. That's changing. Here's where the regulatory landscape stands in 2024 and what advisers need to do to prepare.
FinCEN's proposed rule would extend AML program requirements to registered investment advisers
Investment advisers registered with the SEC have historically occupied an unusual position in the BSA framework. Unlike banks, broker-dealers, and MSBs, registered investment advisers were not explicitly required to maintain AML programs under FinCEN's regulations. That regulatory gap has been a source of concern for years, and FinCEN has been working to close it. In 2024, the regulatory trajectory for investment adviser AML obligations is clearly toward more requirements, not fewer.
SEC examination staff are already asking about AML controls in adviser examinations
FinCEN's proposed rulemaking to extend AML program requirements to registered investment advisers and exempt reporting advisers has been in development for several years. The proposed rule would require advisers to implement written AML programs, file SARs, and comply with the Travel Rule. While the final rule has not yet been published, the direction is clear - advisers who are not preparing for these requirements are behind the curve.
Building AML infrastructure now - before the final rule - is far more efficient than starting from scratch
Even without a final rule, investment advisers face AML-related obligations through other regulatory channels. SEC examination staff have been asking about AML-related controls in adviser examinations, and advisers with significant exposure to high-risk clients - foreign nationals, politically exposed persons, clients with complex ownership structures - face heightened scrutiny. Advisers who cannot demonstrate that they have thought carefully about money laundering risk in their client base are increasingly finding that in examination findings.
Advisers with international clients, real estate exposure, or alternative assets face elevated AML risk
The practical preparation for investment advisers is to build the infrastructure now that will be required when the final rule is published. This means conducting a risk assessment of your client base and business model, drafting written AML policies and procedures, designating a compliance officer with AML responsibility, and implementing a training program for relevant staff. Advisers who have this infrastructure in place when the final rule is published will face a much smoother compliance transition than those who are starting from scratch.
The regulatory trajectory is clearly toward more requirements - preparation now is the prudent approach
For advisers with significant exposure to international clients, real estate investment, or alternative assets, the AML risk profile is elevated regardless of the current regulatory requirements. These advisers should be conducting enhanced due diligence on high-risk clients, monitoring for unusual transaction patterns, and documenting their compliance activities in a way that would satisfy examination scrutiny. The regulatory requirements are catching up to the risk - advisers who are ahead of the requirements will be better positioned when they arrive.
Tags
Compliance Program Specialist · Soflo Consulting
Sofia Delgado is a Compliance Program Specialist at Soflo Consulting with expertise in mortgage lender AML requirements, Florida-specific regulatory obligations, and small business compliance program design. She works with non-bank mortgage lenders, title companies, and real estate professionals to build practical, examiner-ready compliance programs.
5 sections
Key Takeaways
- 1FinCEN's proposed rule would extend AML program requirements to registered investment advisers
- 2SEC examination staff are already asking about AML controls in adviser examinations
- 3Building AML infrastructure now - before the final rule - is far more efficient than starting from scratch
- 4Advisers with international clients, real estate exposure, or alternative assets face elevated AML risk
- 5The regulatory trajectory is clearly toward more requirements - preparation now is the prudent approach
Need Expert Guidance?
Put these insights into action. Schedule a free consultation with a Soflo Consulting compliance specialist.
Stay Ahead of Compliance
Get FinCEN updates, BSA/AML guidance, and federal compliance news delivered to your inbox - no fluff.
