What You Need to Know Before January 1, 2026

Certain registered investment advisers (RIAs) and Exempt Reporting Advisors (ERAs) will face new federal compliance and filing requirements in the new year. Starting January 1, 2026, they will be required to comply with Financial Crimes Enforcement Network’s (FinCEN’s) new anti-money laundering (AML) and countering the financial terrorism (CFT) regulation.

This is considered a fundamental shift in the industry and many RIAs and ERAs’ existing voluntary programs and processes don’t meet the new requirements. Advisers defined under the rule, will have very similar requirements that other financial institutions, including broker-dealers, have with respect to AML programs. Impacted advisers should be actively assessing their current compliance programs and beginning to make the necessary adjustments.

In this final rule, FinCEN includes certain investment advisers in the definition of “financial institution” under the Bank Secrecy Act (BSA), and prescribes minimum standards for AML and CFT programs to be established, among other things.

Exempt Advisers

The new rule applies to SEC registered investment advisers and ERAs that report information to the SEC, but the rule excludes the following:

• Mid-sized advisers ($25 million to $100 million assets under management);
• Multi-state advisers;
• Pension consultants; and/or
• RIAs that do not report any assets under management on Form ADV;
• State-registered advisers;
• Foreign private advisers; and/or
• Family offices.

What is Required before January 1, 2026?

Each RIA and ERA must develop, adopt and maintain a robust, written AML/CFT compliance program that is tailored to the firm’s specific risks and operations. The risk-based AML/CFT compliance program should at minimum cover:

• Internal Policies and Procedures: Designed to prevent firms from being used for illicit finance, money laundering, terrorist financing or other suspicious activities.
• AML Compliance Officer: Every firm will need to designate one or more compliance officers to manage and oversee the program. This person should be sufficiently qualified as an AML/CFT officer and must be provided with decision-making authority regarding the AML/CFT compliance program.
• Ongoing Training: Initial and ongoing AML training of employees to stay compliant and knowledgeable of the evolving regulations. This can be conducted through outside or in-house seminars and include computer-based training.
• Independent Testing: Regular, independent testing to ensure the program’s effectiveness.
• Risk-Based Customer Due Diligence: Diligence to understand the nature and purpose of customer relationship, develop and assess customer risk profiles, conduct ongoing monitoring to identify and report unusual or suspicious transactions and maintain and update customer information on a regular basis.

Reporting Suspicious Activity

If an adviser suspects suspicious activity, they will be required quickly file  a Suspicious Activity Report (SAR), electronically through the BSA E-filing System A SAR filing is triggered when:

• Transactions conducted or attempted by, at, or through an investment adviser;
• Involving funds or assets of at least $5,000; and
• The investment adviser knows, suspects, or has reason to suspect one of the following:
  • The transaction involves funds derived from illegal activity;
  • The transaction is designed to evade reporting requirements;
  • The transaction doesn’t make sense for the customer; or
  • The transaction involves the use of the investment adviser to facilitate criminal activity.

The obligation to file a SAR does not start until January 1, 2026, and thereafter, must be filed within 30 days of initial detection or identification by the investment adviser of facts that may constitute a basis for filing a SAR.

With the compliance deadline looming, reviewing existing compliance and risk management frameworks to ensure an effective compliance program, should be a priority.  Obtaining the advice and guidance of your outside counsel or compliance professional early can help ensure your firm’s compliance with the regulatory expectations under the new rule.