February 15, 2024

FinCEN proposes rule that would subject certain investment advisers to AML/CFT requirements

On February 13, 2024, the U.S. Financial Crimes Enforcement Network (“FinCEN”) introduced a Notice of Proposed Rulemaking (“NPRM”) that would require certain investment advisers to comply with anti-money laundering and countering the financing of terrorism (“AML/CFT”) requirements pursuant to the Bank Secrecy Act (“BSA”).  While investment advisors are currently not subject to comprehensive AML/CFT measures, FinCEN emphasized that they are considered to be “the gatekeepers to the US financial system,” which exposes them to the risk of abuse by money launderers and corrupt officials.  FinCEN issued the proposed rule after a recent risk assessment conducted by the Treasury Department identified several cases in which sanctioned individuals, corrupt official, tax evaders, and other criminal actors – both foreign and domestic – used investment advisors to invest in US securities, real estate, and other assets.  The risk assessment also identified instances where persons from China and Russia accessed sensitive information and emerging technology through investments in early-stage companies.

Under the proposed rule, only investment advisers that are registered with the Securities and Exchange Commission (“SEC”) and those that report to the SEC as exempt reporting advisors would be included in the definition of “financial institution” under the BSA.  The proposed rule would require covered investment advisers to do the following:

  • implement an AML /CFT program;
  • file certain reports, such as Suspicious Activity Reports (“SARs”), with FinCEN;
  • keep records such as those relating to the transmittal of funds; and
  • fulfill other obligations applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations.


FinCEN also proposes that information-sharing provisions between FinCEN, government law enforcement agencies, and certain financial institutions would apply to covered investment advisors, and that covered investment advisers will also be subject to “special measures” imposed by FinCEN under Section 311 of the USA PATRIOT Act.  However, customer identification program requirements would not apply to investment advisers under the proposed rule, and AML/CFT program or filing requirements would not apply to mutual funds that they advise.

FinCEN has also proposed to delegate its examination authority to the SEC, the federal functional regulator currently responsible for investment advisers’ oversight and regulation.  Covered investment advisors will also be given 12 months from the final rule’s effective date to comply with any new AML/CFT requirements.

Members of the public are permitted to share comments on the proposed rule until April 15, 2024.

FinCEN Fact Sheet