FinCEN Narrows the Final AML Requirements for Investment Advisers

What Investment Advisers Need to Know

The Financial Crimes Enforcement Network (FinCEN) has recently issued final regulations narrowing the scope of anti-money laundering (AML) requirements for investment advisers.

Key Changes

Exempts investment advisers with less than $100 million in assets under management (AUM) from certain AML requirements.
Requires investment advisers with $100 million or more in AUM to implement a written AML program and file suspicious activity reports (SARs).
Provides a risk-based approach to AML compliance, allowing investment advisers to tailor their programs to their specific risks.

Exemptions for Small Advisers

Investment advisers with less than $100 million in AUM are now exempt from the following AML requirements:

Implementing a written AML program
Filing SARs
Conducting customer due diligence
Maintaining records of transactions

These exemptions significantly reduce the regulatory burden on small investment advisers.

Requirements for Larger Advisers

Investment advisers with $100 million or more in AUM must implement a written AML program that includes the following:

Customer due diligence procedures
Transaction monitoring systems
Policies and procedures for filing SARs

These requirements are designed to ensure that investment advisers can effectively identify and report suspicious activity.

Risk-Based Approach

FinCEN's final regulations adopt a risk-based approach to AML compliance. This means that investment advisers can tailor their AML programs to the specific risks they face.

Factors to consider when assessing risk include:

The types of clients served
The nature of the investments offered
The geographic locations of clients and investments

By taking a risk-based approach, investment advisers can ensure that their AML programs are effective and proportionate to their risks.

Conclusion

FinCEN's final AML regulations for investment advisers provide a balanced approach that reduces the regulatory burden on small advisers while ensuring that larger advisers have robust AML programs in place. By understanding the key changes and implementing effective AML policies and procedures, investment advisers can comply with the regulations and protect their clients and the financial system from money laundering and other financial crimes.