AML Rule Delayed, Not Derailed: What Advisers Need to Know Now
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Introduction
In a move that surprised few but still raised eyebrows, the Financial Crimes Enforcement Network (FinCEN) has officially postponed the effective date of its long-anticipated Anti-Money Laundering (AML) rule for Registered Investment Advisers (RIAs) and Exempt Reporting Advisers (ERAs). Originally slated to take effect on January 1, 2026, the rule is now delayed until at least January 1, 2028, as FinCEN reopens the rulemaking process to reassess its scope and impact.
What’s Changing—and What Isn’t
Let’s be clear: this is a delay, not a dismissal. The AML rule is still very much alive, albeit in regulatory limbo. FinCEN has signaled its intent to revisit the rule’s substance and, in coordination with the SEC, reexamine the proposed Customer Identification Program (CIP) requirements for advisers.
Advisers should not view this delay as a license to ignore existing regulations. The prohibitions set forth by the Office of Foreign Assets Control (OFAC) are still in effect. All U.S. businesses, including investment advisers, are strictly prohibited from conducting transactions with individuals or entities on OFAC’s Specially Designated Nationals (SDN) list. This includes the requirement to screen clients, beneficial owners, and counterparties against the SDN list and other OFAC watchlists. Violating these regulations can lead to serious civil and criminal penalties, and claiming “I didn’t know” will not be an acceptable defense.
Best Practices While the Rule Waits
Even without a formal AML rule in place, advisers should consider implementing a reasonable AML program, especially when you are not working with custodians and administrators. Why? Because the transactions and services most vulnerable to abuse are often those that fall outside the custodian’s purview—think direct investments, private placements, bespoke fund structures, and even financial planning. Any time a third party is giving you money, or you’re giving money to a third party, if you don’t check OFAC’s SDN list, you risk transacting with a prohibited person.
If you’ve already devoted resources to evaluating AML risks, here’s some good news: your efforts aren’t wasted—they’re multipurpose. There’s a strong correlation between the foundational controls used in AML programs and the requirements of a robust Identity Theft Protection Program under Regulation S-ID. In fact, many of the core elements—such as customer due diligence, ongoing transaction monitoring, and escalation procedures—translate directly into effective measures for detecting, preventing, and mitigating identity theft. For example, the same processes that flag suspicious account activity for potential money laundering can often uncover red flags indicative of identity theft, such as inconsistent personal information, unusual access patterns, or sudden changes to account credentials. Compliance teams can redirect their efforts to comply with the postponed AML rules to fortify Identity Theft Protection Programs. (Bonus: they’ll thank you for not assigning them to “miscellaneous projects.”)
Is extra budget now available that was earmarked for AML compliance? Consider investing in a new or upgraded compliance management platform, attend a conference, or engage an independent consultant to assess the firm’s exam readiness or perform a risk assessment or other focused review of the firm’s control environment.
How Confluence Can Help
At Confluence, we understand that compliance isn’t just about checking boxes—it’s about building resilient, scalable programs that adapt to regulatory uncertainty. Our consulting services can help you:
- Evaluate your current AML and OFAC risk exposure
- Design a CIP tailored to your custodial relationships
- Prepare for future rulemaking with confidence (and maybe even a smile)
We’re not saying we have a crystal ball, but we do have a pretty good track record of helping firms stay ahead of the curve—even when the curve keeps moving.
To learn more about Confluence Compliance Services – and to “make our experts your experts” – contact us or learn more.
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