Investment advisors preparing for a sweeping new set of anti-money-laundering (AML) compliance obligations just received a critical reprieve. The Treasury Department announced this week that it intends to delay the effective date of its proposed AML rule for registered investment advisors by two years, moving the deadline to January 1, 2028.
The Financial Crimes Enforcement Network (FinCEN), the Treasury’s enforcement arm for money-laundering laws, signaled that it will revisit both the scope and substance of the advisor-focused rule. That raises the possibility that the final regulation could be narrower and more tailored to the actual risks posed by advisory firms.
This is welcome news for the advisory community. Gail Bernstein, general counsel for the Investment Adviser Association (IAA), said the organization “appreciates FinCEN’s consideration of the many concerns we have raised with the short compliance timeline and the overbroad scope of the rule.”
While the extension is not yet final, FinCEN says it intends to follow the formal rulemaking process to codify the delay. In the interim, the agency plans to offer “regulatory certainty” by issuing appropriate exemptive relief to push back the effective date.
Importantly, FinCEN also acknowledged it will re-evaluate the content of the rule itself. “During the delayed effective date, FinCEN intends to revisit the substance of the [investment advisor] AML rule through a future rule-making process,” the agency said in a statement.
FinCEN is also reviewing a related rule—proposed jointly with the Securities and Exchange Commission—that would require registered investment advisors to adopt formal customer identification programs. That provision, too, could be subject to modification as regulators re-assess their approach.
Originally proposed in March 2024 and finalized in August, the AML rule emerged after FinCEN identified what it called “illicit finance threats involving investment advisors.” Among the examples cited were attempts by foreign adversaries—including agents of China and Russia—to access sensitive U.S. technologies through private-market vehicles such as venture capital funds.
“Investment advisors have served as an entry point into the U.S. financial system and economy for illicit proceeds associated with foreign corruption, fraud, and tax evasion, as well as billions of dollars ultimately controlled by sanctioned entities including Russian oligarchs and their associates,” the agency noted.
From the start, advisory groups have challenged the scope of the proposed rule, arguing that it imposes heavy compliance burdens on firms that don’t present material AML risk. The IAA, in particular, has pressed for exemptions for RIAs that don’t have custody of client assets or execute transactions.
“Advisors generally do not present significant AML risk, in our view,” Bernstein told Barron’s Advisor. “They do not hold client assets, nor do they execute transactions. We would like to see any rule scoped better to reflect this low risk.”
She emphasized that any revised rule should be laser-focused on actual gaps in the current AML framework and exclude categories of advisory relationships—such as retirement plans or wrap programs—that pose minimal risk of abuse.
For wealth managers and RIAs, the delayed rule offers a breather from what many saw as an unnecessarily aggressive timeline to implement complex systems and controls. But that relief may be temporary.
Ashley Farrell, who leads the financial crimes solutions group at consulting firm Baker Tilly, expects regulators to press forward—albeit with a more nuanced final rule.
“This may be a welcome pause for the industry,” she says, “but it’s unlikely to lead to a complete rollback of these requirements, as this has been over 20 years in the making.”
For now, advisors have additional time to prepare—but should stay alert for new iterations of the rule and consider how future AML expectations could shape their compliance programs. As regulatory focus around financial crime tightens across sectors, RIAs will need to strike a careful balance between compliance readiness and maintaining a streamlined operational footprint.
