Key Takeaways
- The Trump Administration delaying anti-money laundering rules initiated by the Biden Administration has become a recurring theme for the compliance community.
- In the latest move, which halts decades of efforts, FinCEN announced that it is delaying effectiveness of the Investment Adviser AML Program Rule until January 1, 2028 and plans to revisit its scope through new rulemaking. FinCEN also signaled its intent to revisit the proposed Customer Identification Program ("CIP") rule issued jointly with the SEC.
- While regulatory implementation slows, anti-money laundering and illicit finance remain key priorities for the Trump Administration.
Background
In February 2024, the Financial Crimes Enforcement Network ("FinCEN") issued a notice of proposed rulemaking to require SEC-registered investment advisers and exempt reporting advisers to implement anti-money laundering ("AML") and suspicious activity reporting programs (the "Investment Adviser AML Rule"). The Rule, widely viewed as closing a longstanding regulatory gap, was scheduled to take effect on January 1, 2026. On May 13, 2024, FinCEN and the Securities and Exchange Commission ("SEC") also jointly proposed rulemaking to require SEC-registered investment advisers and exempt reporting advisers to adopt Customer Identification Programs (the "CIP Proposal"). The CIP Proposal has not been finalized to date (see our prior coverage of the CIP Proposal here).
Now, the U.S. Department of the Treasury ("Treasury") is tapping the brakes. On July 21, 2025, Treasury announced that it intends to postpone the effective date of the Investment Adviser AML Rule by two years, until January 1, 2028, and revisit the substance of the rule through future rulemaking. FinCEN also indicated it would work with the SEC to reconsider the CIP Proposal.
This latest delay follows a similar move in spring 2025, when Treasury announced it would revisit implementation of the Corporate Transparency Act ("CTA")'s beneficial ownership reporting rules. While that rule was not withdrawn, Treasury's statements emphasized a desire to reduce burdens on small businesses and tailor requirements to risk, paralleling the justifications now being applied to investment advisers and echoing the uncertainty that surrounded the CTA when it first took effect in 2024, when we advised companies to stay the course on compliance preparation.
Efficiency Over Expansion
FinCEN's February 2024 notice emphasized the growing national security risks posed by foreign adversaries and illicit actors exploiting gaps in the investment advisory sector. But FinCEN's July 2025 announcement adopts a more cautious tone, framing the postponement as an effort to "appropriately balance costs and benefits." Treasury also acknowledged the need to tailor AML requirements to the "diverse business models and risk profiles" of advisers, while reducing compliance costs and regulatory uncertainty.
FinCEN stated that it will issue formal exemptive relief to delay the rule's effective date and intends to pursue future rulemaking to revisit its scope. Although the Investment Adviser AML Rule has not been withdrawn, Treasury's statement suggests meaningful revisions are on the table.
AML and Sanctions Enforcement is a Priority for Trump
Although regulatory implementation has slowed, AML and sanctions enforcement has intensified under the Trump Administration, with a clear emphasis on cross-border risks and non-U.S. actors. In May 2025, the Criminal Division of the U.S. Department of Justice ("DOJ") issued a memorandum outlining enforcement priorities that aim to "minimize[] unnecessary burdens on American enterprise" while protecting U.S. interests, and that shift has already materialized in enforcement actions. Our prior coverage of DOJ's May 2025 enforcement memo is available here.
On June 25, 2025, FinCEN designated three Mexico-based financial institutions, CIBanco S.A., Institution de Banca Multiple (CIBanco), Intercam Banco S.A., Institución de Banca Multiple (Intercam), and Vector Casa de Bolsa, S.A. de C.V. (Vector), as primary money laundering concerns under the FEND Off Fentanyl Act. The designations prohibit U.S. financial institutions from engaging in transactions with these entities beginning September 4, 2025, with potential civil and criminal penalties for violations. FinCEN also issued a Geographic Targeting Order covering parts of the U.S. Southwest border, reducing reporting thresholds for cash transactions.
Taken together, these actions suggest that while domestic rulemaking is being reassessed, enforcement is targeting foreign threats. Investment advisers operating internationally should remain alert to evolving AML risks, including local compliance obligations and exposures involving high-risk counterparties, fund structures, and payments flows.
AML and sanctions enforcement remain closely intertwined. Recent months have seen multi-million-dollar settlements between the Treasury Department's Office of Foreign Assets Control ("OFAC") and financial institutions, including broker-dealers and a venture capital firm, for violations involving sanctions evasion, lack of sufficient compliance controls, and processing of unauthorized transactions linked to embargoed jurisdictions and blocked persons. In these actions, U.S. authorities have repeatedly rewarded firms' voluntary self-disclosure, cooperation, and remedial measures with penalties dramatically discounted from their statutory maximums.
Regulators have specifically emphasized that failures to implement robust controls to detect and prevent prohibited transactions, especially those involving cross-border activities or international accounts, are a recurring vulnerability. The resulting enforcement outcomes highlight the need for financial intermediaries, including investment advisers and other "gatekeepers," to maintain effective customer monitoring and escalation protocols. OFAC continues to reward voluntary self-disclosure and cooperation, while making clear its expectation that firms will actively manage sanctions non-compliance risks and respond promptly to address compliance deficiencies.
What This Means
Despite the delay in rule implementation, the trend line remains clear:
- AML compliance obligations are expanding, even if implementation is delayed.
- Even in the absence of effective AML rules, investment advisers remain subject to OFAC sanctions rules.
- Investment advisers will have an opportunity to comment on a revised Investment Adviser AML Rule and a revised CIP proposal during the upcoming rulemaking process and should consider participating to shape the revised rules.
- To the extent they maintain voluntary AML programs, investment advisers may wish to continue aligning their policies and procedures with sanctions obligations and broader risk-based compliance principles.
- In addition, investment advisers that maintain voluntary AML programs may wish to consider industry best practices, as set forth in guidance from regulators, trade associations, and counterparties.
- Investment advisers may also have contractual AML obligations when acting pursuant to agreements with broker-dealers (such as those as described in Securities Industry and Financial Markets Association ("SIFMA") no-action letters), which can be enforceable by regulators and counterparties.
- Although FinCEN's parallel announcement regarding CIPs underscores continued interest in the sector, the delay suggests regulators are reevaluating both rules and may ultimately narrow or significantly revise them.
- Recent enforcement actions, including in the "financial gatekeeper" sector (see our prior OnPoint on GVA Capital), show the Administration's focus on those facilitating cross-border transactions and potential illicit flows.
- Self-disclosure, cooperation, and proactive remediation remain critical in enforcement outcomes.
- The Trump Administration's priorities emphasize protecting the U.S. financial system, particularly from narcotics trafficking and foreign adversaries, and have increasingly targeted non-U.S. entities and cross-border transactions.
The Investment Adviser AML Rule may not be going into effect until January 1, 2028, but sanctions enforcement risk for investment advisers, particularly those with foreign-facing activities, remains.
How We Can Help
Dechert has deep experience advising private funds, investment advisers, financial institutions and other market participants on the full range of AML compliance and enforcement matters. We assist clients in designing and implementing risk-based AML programs, navigating U.S. sanctions obligations, and responding to government inquiries or enforcement actions. In light of the delayed Investment Adviser AML Rule and the evolving regulatory landscape, we help clients assess their exposure, evaluate whether and how to update existing compliance frameworks, and engage constructively with regulators where appropriate. We also provide strategic guidance on how to align compliance efforts with emerging enforcement priorities while mitigating potential operational and reputational risk.
The authors thank Isy Kristick, a summer associate at Dechert LLP, for her contribution to this OnPoint.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
