Compliance and Regulatory Alerts | 08-29-24
Alert: Treasury Department’s Final AML Rule for Investment Advisers
On August 28, 2024, the Treasury Department released its long-awaited final rule on anti-money laundering (AML) regulations for investment advisers. This comprehensive rule, set to take effect on January 1, 2026, will significantly impact the compliance landscape for many investment advisers. While some changes address industry concerns, the rule largely maintains the structure of the initial proposal. Let's dive into the details of this new regulation.
Key Elements
Scope: Applies to most SEC-registered investment advisers, excluding Mid-Sized Advisers, Pension Consultants, and Multi-state Advisers.
Foreign Advisers: Limited to U.S.-based activities and services to U.S. persons or funds with U.S. investors.
Sub-Advisers: May exclude primary advisers from their AML program under certain conditions.
Program Approval: Senior management or equivalent can approve AML programs.
Exemptions: Mutual funds and collective investment funds exempt from adviser AML programs.
Requirements:
- Risk-based AML programs
- Designation of an AML officer
- Customer due diligence
- Suspicious Activity Report (SAR) filing
- Information sharing with government and financial institutions
- Currency Transaction Reports (CTRs) and recordkeeping
State-Registered Advisers: Not required to implement AML programs.
Compliance Timeline
Investment advisers have until January 1, 2026, to comply with the new rule. While this may seem like a generous timeline, the complexity and breadth of the requirements suggest that advisers should begin their preparations well in advance.
Conclusion
The Treasury Department's final AML rule for investment advisers represents a significant shift in the regulatory landscape. While some concessions were made to address industry concerns, the overall impact remains substantial. Investment advisers should carefully review the final rule and begin assessing its implications for their operations. Developing comprehensive AML programs, training staff, and potentially updating systems and processes will be crucial steps in ensuring compliance by the 2026 deadline.
As the implementation date approaches, we can expect further guidance and best practices to emerge. Stay tuned for more updates and expert analysis on navigating this new regulatory environment.
Contact Bates Group today to learn more about the AML rule and our customized Compliance and Regulatory support for Investment Advisers, Broker-Dealers, and more.