Advisors Gear Up for Treasury’s New Anti-Money Laundering Rule

If you see something, say something — and if you’re an advisor, definitely say something.

Starting in 2026, most advisory firms will be required to formally report suspicious money laundering activities to the US Treasury. Finalized last week, this new rule mandates that nearly 20,000 registered independent advisors, as well as exempt reporting advisers, implement an anti-money laundering program and notify the Financial Crimes Enforcement Network of any unusual transactions, according to a proposal.

The rule will “close critical loopholes in the US financial system that bad actors use to facilitate serious crimes like corruption, narcotrafficking, and fraud,” Treasury Secretary Janet Yellen said in a release.

The rule expands the definitions of “financial institution” under the Bank Secrecy Act. However, RIAs registered with the SEC solely because they are mid-sized advisors, multi-state advisors, pension consultants, or those that do not report any assets under management will be excluded from the rule. As of July 2023, there were roughly 15,400 RIAs and 6,000 ERAs in the US, according to Treasury data. 

Reporting for Duty

Advisors have been preparing for the Treasury’s AML rule since the department first proposed it in 2015. Carl Fornaris, a partner at law firm Winston & Strawn, told The Daily Upside that most advisors already have AML programs, except now they will be formalized. “The Treasury is giving a lot of runway for the industry to have a more bank-like or broker-dealer-like AML compliance culture,” he said.

However, FinCEN’s requirements could become expensive. While the cost should be manageable for advisors affiliated with banks and brokers, that won’t necessarily be the case for non-affiliated firms. “The costs could be dramatic especially considering the time required to develop systems for detecting and reporting suspicious activity,” Braddock Stevenson, of counsel for the law firm Paul Hastings, told The Daily Upside. 

Some industry pushback has emerged, primarily because advisors do not hold custody of client funds and such money laundering would occur through the banks, Stevenson said. Nonetheless, FinCEN believes that advisors, who have direct contact with clients, are also positioned to sniff out suspicious activities.

Beware the Oligarchs: As well as a strategy to suss out fraud and tax evasion, the rule is in line with regulators’ efforts to crack down on Russian oligarchs and Chinese crime syndicates using the US financial system for illicit purposes. 

“The reality is that registered investment advisors have been a type of financial institution that has been escaping the Patriot Act’s AML program requirement for 23 years,” Fornaris said. “This is just something that the Treasury — under a number of administrations — has had on their radar screen.”