The Treasury Department is postponing its investment advisor anti-money laundering rule by two years and plans to “revisit the scope” of the regulation.
The Department’s Financial Crimes Enforcement Network will postpone the effective date of the AML rule from Jan. 1, 2026, to Jan. 1, 2028, and intends to “revisit the substance” of the rule in a new rulemaking process.
“The IA AML Rule seeks to address ongoing illicit finance risks, threats and vulnerabilities posed by criminals and foreign adversaries that exploit the U.S. financial system and assets through investment advisors,” a statement read. “FinCEN recognizes, however, that the rule must be effectively tailored to the diverse business models and risk profiles of the investment advisor sector.”
While organizations representing advisors were jubilant, investor advocates excoriated the decision, with Consumer Federation of America Investment Protection Director Corey Frayer saying “drug lords, corrupt politicians and fentanyl smugglers have never had a better friend” than President Donald Trump’s administration.
Last August, the Treasury adopted the rule for SEC-registered advisors, requiring them to implement AML programs and submit “suspicious activity reports” to FinCEN on transactions involving or aggregating funds and assets over $5,000 that the RIA knows or suspects involve money from illegal activity that is skirting Bank Secrecy Act requirements.
FinCEN delegated examination and enforcement authority to the SEC, which has long overseen broker/dealers for AML compliance under existing rules. In May 2024, FinCEN proposed a joint rule creating customer identification programs for RIAs, but the Treasury also intends to “revisit” that rule.
Industry-focused organizations like the Investment Adviser Association applauded the delay. General Counsel and Head of Public Policy Gail Bernstein previously told WealthManagement.com it would be “very hard” for RIAs to comply with the rule by the Jan. 1 effective date.
“The IAA appreciates FinCEN’s consideration of the many concerns we have raised with the short compliance timeline and the overbroad scope of the rule,” she said. “We look forward to working with FinCEN and the SEC to better achieve an appropriate balance between ensuring an effective regulatory regime to combat illicit finance while minimizing duplication and unnecessary burdens on investment advisors.”
The delay also received praise from the venture capital sector, with National Venture Capital Association President and CEO Bobby Franklin saying the rule “misunderstood the role of venture capital investments in startups, overlooked the illiquid and long-term nature of the venture industry, and posed a risk to the flow of capital to early-stage startups that drive American innovation.”
Concerns over the AML rule reached a fever pitch ahead of the delay, according to a survey from ACA Group, the IAA and Yuter Compliance Consulting released this week. The results indicated over four in 10 respondents named “AML readiness” as a top compliance concern (second only to artificial intelligence).
According to the survey results, 83% of firms have some AML policies, but only 22% have updated policies to align with the rule.
At IAA’s annual conference this spring, SEC Commissioner Hester Peirce said she’d opposed the AML-related SEC rules when proposed and argued custodians already get the information through following other mandates. She’d hoped regulators would take a “holistic review” of their AML approach.
“Have we just gone too far down that road of trying to put everything into a very complex and expensive regime, and then what do we get at the end of the day?” she asked.
Frayer served as a senior policy director for former SEC Chair Gary Gensler during President Joe Biden’s administration before joining the Consumer Federation of America this year, and framed the rule’s delay as the latest example of a troubling trend.
“Trump talks a tough game on drug cartels and terrorism, but he has rolled back almost every rule that’s meant to hit crime where it hurts by following the money,” he said. “Trump has taken actions from exempting crypto from money-laundering laws to halting enforcement of foreign bribery laws to disbanding the (Justice Department) teams tasked with investigating and enforcing anti-money laundering and financing of terrorism.”
According to the Treasury Department statement, FinCEN will provide RIAs with “regulatory certainty” by issuing “appropriate exemptive relief” to delay the effective date.
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