Earlier this year, we discussed the proposed rule by the Financial Crimes Enforcement Network (FinCEN) that aimed to impose Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) compliance obligations on Registered Investment Advisers (RIAs).1 In late August 2024, FinCEN finalized this rule, marking a potentially-significant shift in the compliance landscape for RIAs and closing a long-standing gap in the US regulatory regime (the ‘Investment Adviser Rule’ or ‘Final Rule’). This development underscores the increasing focus on financial crimes compliance and the critical role RIAs play in safeguarding the financial system. Covered Investment Advisers will be required to come into compliance with the rule by January 1, 2026.
Historically, RIAs have operated without the same level of BSA/AML and CFT (Countering the Financing of Terrorism) obligations as other financial institutions. However, the growing complexity of financial markets and the sophistication of illicit activities have prompted regulators to extend these requirements. The final rule by FinCEN brings RIAs squarely into the fold of entities (i.e. ‘Financial Institutions’) responsible for implementing risk-based BSA/AML programs.
The Investment Adviser Rule stipulates that Compliance Programs for covered investment advisers must include:2
KEY DIFFERENCES BETWEEN THE PROPOSED AND FINAL RULE
The final Investment Adviser Rule accepts the majority of provisions from FinCEN’s original proposed rule in February, with some notable key revisions in response to public comments:
Next Steps for Covered Investment Advisers
Investment Advisers should take proactive steps to assess their existing compliance functions, operations, and technology to determine their readiness for the upcoming compliance date of January, 2026. As a starting point, Capco recommends the following initial actions to determine the scope and depth of any necessary compliance efforts:
HOW CAPCO CAN HELP
Capco’s US business has 35+ resources with an average of 12 years’ experience in financial crimes compliance and related risk management, including 15 Certified Anti-Money Laundering Specialists (CAMS).
We can quickly assess BSA/AML Compliance Programs, using a proven framework to right-size the scope and breadth of AML/CFT activities to meet the specific needs of each Investment Adviser’s business operations.
We can deliver in both an advisory and a managed services capacity to support clients’ AML/BSA Compliance needs. For example, we can assist in anything from designing a bespoke BSA/AML compliance operating model to the execution of ongoing monitoring of KYC and/or transaction monitoring alert and case disposition.
We have experience with Financial Institutions of all sizes and risk-profiles and can tailor our services, accordingly, including scalable resource pools to meet periods of high demand or backlogs of work requiring completion.
Our team draws from a diverse background of lawyers, ex-regulators, leading risk management professionals, data scientists, and former BSA Officers and CCOs.
Capco’s deep domain expertise coupled with our agile and entrepreneurial approach means we can design tailored solutions rapidly and effectively using leading technology such as GenAI and our homegrown SAR Genie.
References
1 https://www.capco.com/intelligence/capco-intelligence/fincen-proposes-bsa-aml-compliance-obligations-for-advisers
2 https://public-inspection.federalregister.gov/2024-19260.pdf