CLS Blue Sky Blog

Kirkland & Ellis Discusses FinCEN Proposal to Increase Anti-Money Laundering Requirements for Investment Advisers

On February 13, the U.S. Treasury, Financial Crimes Enforcement Network (“FinCEN”) proposed1 (the “Proposed Rule”) to apply affirmative anti-money laundering and countering-the-financing-of-terrorism (“AML/CFT”) program obligations as prescribed by the Bank Secrecy Act (the “BSA”) to investment advisers. These obligations historically have applied primarily to banks, broker-dealers and other similar financial institutions.2 The Proposed Rule is part of a broader overhaul to the U.S. anti-money laundering regime that includes the now-effective Corporate Transparency Act and upcoming rulemaking to enhance the Customer Due Diligence Rule (“CDD Rule”).

The Proposed Rule would affect both SEC-registered investment advisers and exempt reporting advisers (e.g., mid-sized private fund advisers and venture capital fund advisers3), the vast majority of which have adopted some form of AML/CFT procedures under a patchwork of historical regulatory requirements, counterparty certification obligations and investor due diligence requests. However, by including investment advisers within the definition of “financial institution” under the BSA and in FinCEN’s federal anti-money laundering program regulations, the Proposed Rule would impose certain new or additional anti-money laundering program requirements on such investment advisers, including to:

However, the Proposed Rule would not at this time require investment advisers to establish a formal customer identification program to collect beneficial ownership information for counterparties. For the moment, these affirmative “CIP” program requirements will remain applicable only to more highly regulated institutions like banks and broker-dealers, as well as under the laws of certain non-U.S. jurisdictions, although FinCEN anticipates future rulemaking by the end of 2024 to enhance these requirements. Future updates to the CDD Rule may also affect investment advisers.

As registered investment advisers are already subject to routine SEC examination, FinCEN proposes to delegate authority to the SEC to include any final anti-money laundering program inspections in scope of routine adviser examinations.

FinCEN is accepting comments on the Proposed Rule until April 15, with any resulting final rule anticipated to be effective 12 months after adoption.


  1. The Notice of Proposed Rulemaking is available through this link, and the Fact Sheet summarizing the Proposed Rule is available through this link.
  2. The proposal reinvigorates an effort that produced a similar proposed rule in 2015 for SEC-registered investment advisers that stalled in the rulemaking process; however, this renewed focus comes against a backdrop in which advisers’ assets under management have nearly doubled in the intervening 10 years and in a climate of heightened sanctions and financial crimes enforcement. Concurrent with the Proposed Rule, FinCEN is withdrawing the 2015 proposed rule.
  3. The proposed definition of “investment adviser” would include certain non-U.S. investment advisers that are physically located abroad (i.e., do not have a branch, office or staff in the U.S.) but are nonetheless registered or required to register with the SEC (for registered investment advisers) or file Form ADV (for exempt reporting advisers).

This post comes to us from Kirkland & Ellis. It is based on the firm’s memorandum, “FinCEN Proposes to Increase AML Requirements for Investment Advisers,” dated February 20, 2024, and available here. 

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