FinCEN’s New AML Rules: What Advisors Need to Know

FinCEN’s New AML Rules: What Advisors Need to Know

If you’re a registered investment advisor (RIA) or exempt reporting advisor (ERA), you’ll want to speak with Parallel Markets by the time you finish this article.

Recent regulatory changes are set to reshape the landscape for RIAs and ERAs. The U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) finalized a rule that requires advisors to implement Anti-Money Laundering (AML) compliance programs and monitor for suspicious activity.

This game-changing rule is set to take effect on January 1, 2026. To further strengthen the effort, the Securities and Exchange Commission (SEC) is also proposing a new Customer Identification Program (CIP) rule to expand identity verification requirements for RIAs and ERAs. This rule is expected to  be finalized and take effect in a similar timeframe to the new AML Rule. 

These regulations represent a major shift in how investment advisors will need to operate, and now’s the time to prepare. In this post, we’ll break down what this means for your business and how you can stay ahead of the curve.

Why are these rules important?

For years, advisors have operated outside of the strict AML rules applied to banks, broker-dealers, and other financial institutions. But as the financial world becomes more complex, so do the risks. Investment advisors often handle substantial assets and transactions, which makes them a potential target for illicit activities like money laundering.

By extending Bank Secrecy Act (BSA) obligations to RIAs and ERAs, FinCEN is closing the gaps and giving law enforcement greater oversight into investment activities that had previously flown under the radar.

What does the AML Rule require?

The heart of the new rule is the requirement for RIAs and ERAs to develop a robust, written AML compliance program. This isn’t a one-size-fits-all directive — your program needs to be tailored to your firm’s specific risks and operations. Here’s what it will need to cover:

• Internal Policies and Procedures: These should be designed to prevent your firm from being used for illicit finance, terrorist financing or other suspicious activities.
• AML Compliance Officer: Every firm will need to designate one or more compliance officers to manage the program.
• Ongoing Training: Your team will need to receive ongoing AML training to stay compliant with evolving regulations.
• Independent Testing: Regular, independent testing will be necessary to ensure your program’s effectiveness.‍
• Risk-Based Due Diligence: This diligence includes understanding your customers, assessing their risk profiles, and staying alert for unusual or suspicious transactions.

Reporting Suspicious Activity

One of the cornerstones of the new AML rule is the requirement for advisors to file Suspicious Activity Reports (SARs). If you suspect any of your transactions involve funds from illegal activity, you’ll need to act. Here’s what triggers a SAR:

• Transactions involving at least $5,000 in assets where there’s suspicion of illegal activity.
• Transactions designed to evade reporting requirements.
• Transactions that just don’t make sense for your customer.

Once flagged, you’re responsible for filing a SAR with FinCEN, which could prevent serious financial crimes from going unnoticed.

What about recordkeeping?

The AML rule also requires detailed recordkeeping. RIAs and ERAs must maintain records of their AML activities, ensuring they’re available for inspection by regulators like FinCEN or the SEC. This isn’t just about filing away documents — it’s about creating an audit trail that proves your firm is taking AML compliance seriously.

Delegation, But Not a Free Pass

The good news is that the AML rule allows advisors to delegate some of these responsibilities to third parties, such as fund administrators. However, you’re still on the hook for compliance. If you choose to delegate, make sure the third party is fully equipped to handle the work, and be ready to provide FinCEN and the SEC with records if requested. Delegation can lighten the load, but it doesn’t absolve you of responsibility.

KYC and Customer Due Diligence

While the AML rule is comprehensive, it doesn’t directly require advisors to implement Customer Identification Programs (CIP). However, the SEC’s proposed CIP Rule is expected to mandate that advisors collect and verify key customer information, like names, dates of birth, addresses, and identification numbers, similar to what banks currently do.

As the upcoming CIP Rule is finalized, it’s a smart move to prepare and start building out your KYC and Customer Due Diligence (CDD) procedures. RIAs and ERAs will need to establish risk-based procedures to assess customer relationships and spot suspicious activity over time. In other words, formalizing your customer onboarding and verification processes isn’t just about checking a box — it’s about protecting your firm and staying ahead of regulatory requirements.

What should RIAs and ERAs do now?

January 2026 may seem like a long way off, but preparing now is key to ensuring a smooth transition. Here’s how to get started:

• Review Your Compliance Programs: Make sure your existing AML/CFT programs are up to date and meet the new standards.
• Train Your Team: Educate your staff about the new rules, especially around the importance of SARs and due diligence.

Leverage Technology: Invest in solutions that automate your compliance processes, including transaction monitoring and customer verification, to streamline your workflow and reduce the risk of error.

Stay Ahead of the Curve — Act Now! 

The new AML and CIP rules are a wake-up call for investment advisors. With the right preparation and the right tools, your firm can not only comply with these regulations but also build a stronger, more resilient operation. At Parallel Markets, we’re here to help you navigate these changes with ease, offering advanced tools to make compliance less of a headache.

For more information on how we can support your firm through these regulatory changes, contact us at RIA@parallelmarkets.com or visit our website today. The first 100 firms to mention "RIA2026" will receive a 25% discount off their annual contract.