Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Program and Suspicious Activity Report (SAR) Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) recently issued a final rule on AML/CFT to help safeguard the US investment advisor sector against illicit finance activity.
The final rule defines certain investment advisers as a "financial institution" under the regulations that implement the Bank Secrecy Act (“BSA”). The rule prescribes minimum standards for AML/CFT programmes to be established by certain investment advisers and requires them to report suspicious activity to FinCEN pursuant to the BSA. This includes:
- Investment advisers registered with or required to register with the SEC, also known as registered investment advisers (“RIAs”), and
- Investment advisers that report information to the SEC as exempt reporting advisers (“ERAs”)
The final rule excludes from the definition of “investment adviser”:
- RIAs that register with the SEC solely because they are (i) mid-sized advisers, (ii) multi-state advisers, (iii) pension consultants, or (iv) RIAs that do not report any assets under management (“AUM”) on Form ADV.
- Investment advisers that have their principal office and place of business outside the United States. The rule applies only to their activities that (i) take place within the United States, including through the involvement of U.S. personnel of the investment adviser, such as an agency, branch, or office within the United States, or (ii) provide services to a U.S. person or a foreign private fund with an investor that is a U.S. person.
- State-registered advisers.
- Foreign private advisers or family offices.
Investment advisors subject to the rule are required to:
- Implement a risk-based and reasonably designed AML/CFT program including:
- Internal policies, procedures and controls;
- independent testing of the AML/CFT program;
- designation of an AML/CFT officer;
- employee training; and
- ongoing Customer Due Diligence (“CDD”)
- 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); and
- Fulfil certain other obligations applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations, such as special information-sharing procedures.
Investment advisers must have implemented the requirements and started complying with this final rule no later than January 1, 2026.
Apex Compliance Solutions can help U.S. Investment Advisors with the following services:
- Compliance advisory
- Ongoing compliance execution
- SEC/state compliance manuals
- Form ADV
- Form 13F and 13H
- AML/CFT policies and procedures
- AML/CFT training
- AML/CFT risk assessments
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