Democratic lawmakers are pressing the Treasury Department on the decision to postpone (and possibly revamp) an anti-money laundering rule focused on investment advisors, arguing the delay raises questions about the Trump administration’s “plans to protect our financial system.”
In a letter dated Sept. 18, U.S. Sens. Elizabeth Warren (D-Mass.) and Andy Kim (D-N.J.), and U.S. Rep. Maxine Waters (D-Calif.) want U.S. Treasury Secretary Scott Bessent to explain the delay in the anti-money laundering rule announced in July. The rule’s effective date was initially Jan. 1, 2026, but was postponed by two years.
“The decision to delay compliance leaves American national security and economic stability vulnerable,” the legislators wrote. “The investment advisor sector is ‘one of the most significant gaps’ in the United States’ anti-money laundering regime, largely due to a lack of comprehensive AML/CFT regulations that apply across the industry.”
In August 2024, under the Biden administration, the Treasury Department adopted the rule for SEC-registered advisors, requiring them to implement AML programs and submit reports to the Department’s Financial Crimes Enforcement Network for transactions involving or aggregating funds or assets above $5,000 that the RIA suspects are money from illegal activity. FinCEN also proposed a joint rule to create RIA customer identification programs.
In a statement in July, the department postponed the rule and signaled an intent to “revisit” it, acknowledging that while the regulation “seeks to address ongoing illicit finance risks” from criminals and foreign adversaries, it “must be effectively tailored to the diverse business models and risk profiles of the investment advisor sector.”
Advisors (and their advocates on Capitol Hill) had longed for a delay of the rule, which they called cumbersome and duplicative. While lobbyists for advisors and the venture capital industry celebrated the postponement, investor advocates cried foul, including Consumer Federation of America Investor Protection Director Corey Frayer, who said “drug lords, corrupt politicians and fentanyl smugglers have never had a better friend” than the Trump administration.
In the letter to Bessent, the lawmakers argued that advisors for small or private funds can accept investors without knowing the ultimate owners or fund sources, making it the only U.S. capital market actor “without a legal obligation to know their clients.” Larger investment advisors working with clients have more oversight, but still lack “comprehensive” AML mandates.
“The administration has already taken several steps to roll back illicit finance protections, including disbanding multiple Department of Justice teams tasked with protecting against money laundering and illicit finance and narrowing enforcement of U.S. foreign bribery laws,” the letter read.
In the letter, the lawmakers ask Bessent to detail what “specific segments of the investment advisor sector” led Treasury to postpone the rule, and what steps FinCEN will take to counter money launderers exploiting the advisory space before the new effective date.
Additionally, legislators want to know what “external parties” the Treasury communicated with or got input from about reevaluating the AML rule. They asked Bessent to provide all external communication about it and questioned whether he would commit to upholding the new effective date of Jan. 1, 2028.
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