On July 21, 2025, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) announced its intent to postpone the effective date of the Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers Rule (the IA AML Rule), which will impose new requirements on registered investment advisers and exempt reporting advisers.
The IA AML Rule seeks to address ongoing illicit finance risks, threats, and vulnerabilities posed by criminals and foreign adversaries that exploit the US financial system and assets through investment advisers. The effective date, originally set for January 1, 2026, is expected to be delayed until January 1, 2028. FinCEN stated that it will use the extended timeline to reconsider the scope and substance of the IA AML Rule through future rulemaking. FinCEN stated that, during that time, it will also work with the Securities and Exchange Commission (SEC) to revisit the proposed rule establishing customer identification program requirements for investment advisers (the IA CIP Rule),1 FinCEN and the SEC proposed jointly shortly after FinCEN's IA AML Rule proposal. In the IA AML Rule's adopting release, FinCEN emphasized the interconnectedness of the two rulemakings, stating that it "intends for this [IA AML Rule] and [the IA CIP Rule] to have the same compliance date" and "any obligation for investment advisers to collect the beneficial ownership information of legal entity customers to not be effective until a CIP rule is finalized" and the customer due diligence rule applicable to covered financial institutions has been revised.
FinCEN and the SEC are expected to coordinate in administering the IA AML Rule, which would (1) represent a significant expansion of the anti-money laundering (AML) regulatory framework to cover a broad range of investment advisers under "financial institution" as defined in the Bank Secrecy Act (BSA) and (2) thereby subject such advisers to certain requirements, including:
- Implementing a risk-based AML/countering the financing of terrorism compliance program.
- Filing suspicious activity reports with FinCEN.
- Complying with the BSA's recordkeeping and travel rules, including obligations relating to the transmittal of funds.
- Eventually, satisfying additional requirements applicable to financial institutions under the BSA, including customer identification and due diligence obligations.
The announcement addresses three concerns raised by the investment adviser industry about the IA AML Rule: its scope, attendant compliance burdens, and coordination with the IA CIP Rule. First, FinCEN stated that it intends to narrow the scope of the proposed rule to better align with the "diverse business models and risk profiles of the investment adviser sector." Second, the extended timeline is expected to mitigate potential compliance burdens by allowing more time for preparation and implementation. Third, the industry had expressed concern that the comment period for the IA AML Rule concluded before the IA CIP Rule was released, limiting the ability to evaluate the proposals and implement the two new rules together as anticipated by the regulators. FinCEN, reviewing both proposals together,2 should allow for better coordination between the two rules and may allow for further industry input.
The delay in implementation of the IA AML Rule comes amid a broader trend by the current US administration to revisit and, in some instances, scale back existing anti-corruption and AML initiatives. On February 10, 2025, Executive Order 14209 temporarily suspended the initiation of Foreign Corrupt Practices Act investigations and enforcement actions by the Department of Justice (DOJ). (Investigations resumed in June.)3 Around the same time, the DOJ disbanded two anti-kleptocracy units that had previously led efforts to investigate and prosecute transnational corruption.4 In March 2025, the Treasury Department and FinCEN also significantly narrowed the scope of regulations implementing the Corporate Transparency Act, a statute enacted in 2021 to combat money laundering by requiring reporting companies to report certain beneficial owners to FinCEN. The agencies issued revised guidance exempting nearly all domestic reporting companies from beneficial ownership reporting obligations.
Given the previously referenced pattern of deregulation and the need to coordinate the IA AML Rule with the CIP Rule and other rules, we believe it is unlikely the IA AML Rule will take effect in its current form. Although FinCEN has framed the delay as a temporary pause for internal review, the combination of deferred implementation and narrowed regulatory focus suggests that FinCEN may either significantly revise the rule or abandon it altogether.
The deferral of the IA AML Rule contrasts with accelerating AML initiatives abroad. In July 2025, the European Union launched its new Anti-Money Laundering Authority, which is expected to enhance cross-border coordination and oversight across member states. Australia and the United Kingdom have also recently passed regulatory expansions of their AML regimes. Investment advisers should continue to monitor regulatory developments closely. Even if the final IA AML Rule is narrowed or withdrawn, clients, investors, and counterparties may continue to expect investment advisers to perform some level of know your customer (KYC) and AML screening, particularly in light of expanding international AML standards and expectations.
Footnotes
1. Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers, 89 Fed. Reg. 44,571 (May 21, 2024), available at https://www.govinfo.gov/content/pkg/FR-2024-05- 21/pdf/2024- 10738.pdf.
2.See, e.g., the Investment Company Institute Letter to FinCEN available at 25-cl-fincen-anti-money-laundering-program.pdf.
3. Exec. Order No. 14,209, Pausing Foreign Corrupt Practices Act Enforcement to Further American Economic and National Security (Feb. 10, 2025)https://www.whitehouse.gov/presidential-actions/2025/02/pausing-foreign-corrupt-practices-act-enforcement-to-further-american-economic-and-national-security/
4. See Total Elimination of Cartels and Transnational Criminal Organizations
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