Compliance
Deadline Approaching For Input On AML Rule Changes
FWR examines the continued changes and developments applying to anti-money laundering regulations and other important compliance challenges for wealth advisors in the US.
There’s a new deadline looming regarding the US government’s Anti-Money Laundering Rule (AML) – October 22. That’s when requests for comments on proposed amendments to the rule’s filing requirements must be submitted to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN).
The rule, which applies to RIAs with more than $110 million in assets, was originally due to take effect January 1, 2026, but in July FinCEN announced that the enactment of the rule would be delayed until January 2028.
The request for comments is part of a “broader review” of the AML rule FinCEN is undertaking together with the Securities and Exchange Commission, which will oversee the rule's enforcement.
Wealth mangers should expect a “modified rule proposal,” according to Evan Hall, co-chair of the Investment Adviser Regulatory Compliance practice at Haynes Boone. The “biggest complaint” from industry groups to date has centered on aligning the Customer Identification Programs for RIAs with the AML rule, Hall said.
Industry requests
Industry trade organizations are likely to ask FinCEN to
“reevaluate” the scope of which firms the AML rule will apply,
Hall said. “Advisory firms want more flexibility based on their
business,” he explained.
RIAs are likely to "push for two practical changes," said Madhu Nadig, co-founder and chief technology officer of Flagright, a monitoring platform for AML compliance. "First, a data-sharing mandate with safe harbor so custodians and fund administrators deliver standardized, machine-readable transaction feeds, and allow joint suspicious activity reports (SARs) to avoid duplicative work and make surveillance real."
Nadig also expects wealth management firms to request sector-specific, risk-based guidance that include typologies and thresholds tailored to advisory flows (subscriptions/redemptions, third-party wires, cross?custodian transfers) rather than bank-style rules. That combination "tightens AML outcomes while cutting false positives and paperwork,” he said.
For its part, the prominent industry trade group, The Investment Company Institute (ICI) is also expected to request that the new AML rule avoid “duplication of efforts” for record keeping, noting in its request to delay compliance that “the vast majority of advisory client assets are held in accounts of qualified custodians.”
The ICI wants Suspicious Activity Reports (SAR) and Information Sharing Obligations clarified as well. Additional guidance is needed, the ICI maintained, “because there are circumstances in which an advisor has limited access to relevant data and the advisor’s obligations are unclear.” Industry groups have also signaled they will request that smaller advisory firms with fewer than 20 or 100 employees be exempt from the rule altogether as well as firms that don’t manage client assets but only provide advice.
They are also expected to seek carve-outs of reduced obligations for fund administrators, custodians or intermediaries already subject to AML regimes in order to avoid duplication.
Despite delay, regs remain
Firms are also likely to ask for further implementation delays to
give them more time to be able to put fintech systems, staffing
and training in place.
But RIAs shouldn’t relax their AML efforts because of the two year – and possibly longer – delay.
“The regulations won’t go away,” Nadig reminded advisor. “They will remain.”
Firms should think about what Nadig calls their “risk matrix” in preparation when working with wealthy and foreign-based clients. “If the money has unclear origins, or you don’t know where the money is coming from, that’s a big AML risk,” he warned.
Firms should try to ascertain client risks and develop systems that can detect red flags such as large money transfers, sudden liquidity events and unusual asset allocations, Nadig said.
Hall also urged advisors to begin implementing AML security measures sooner rather than later. “Advisors should expect a reasonable degree of inquiry from the SEC,” he said. “There’s going to be oversight even with the delay.”
Family Wealth Report has delivered a range of articles on the compliance position faced by US-based advisors under the AML rule:
https://www.familywealthreport.com//article.php/AML-Compliance-Cheat-Sheet-For-RIAs-