We wanted to share news about a major development in compliance for investment advisers. As many of you are likely aware, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) recently issued a final rule requiring many investment advisers to establish an Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) program. The rule will take effect January 1, 2026.
FinCEN and the Securities Exchange Commission (SEC) have also published a proposed rule to similarly extend a requirement for Customer Identification Programs (CIP), which would require investment advisers to take more rigorous, risk-based steps to verify the identity of their customers (i.e., their investors). A covered investment adviser would be required to develop and implement a CIP within six months of the regulation's effective date.
Previously, many GPs across the private markets, including many of our customers, were not specifically required to meet these types of compliance obligations. That is now changing, and many previously exempt GPs now need to implement AML/CFT programs by January 1, 2026, and, should the CIP rule be finalized, a CIP program.
While we cannot offer legal advice on exactly how these rules impact each individual GP (for that, we suggest you speak to your legal counsel), we can provide a high-level overview of the key elements of these programs.
To comply with the final AML/CFT rule, covered investment advisers will need to establish a tailored, risk-based AML/CFT program, which includes:
Developing policies, procedures, and controls;
Appointing a compliance officer to oversee the program;
Providing ongoing training for employees;
Conducting independent testing/auditing of the program;
Performing customer due diligence to understand and document the purpose and nature of business; and
Monitoring for suspicious activity and filing reports with FinCEN when necessary.
To comply with the proposed CIP rule, covered investment advisers will need to:
Establish, document, and maintain a written customer identification program;
Verify customer identities using risk-based procedures;
Maintain records of identity verification processes; and
Check customers against government watchlists.
The situation is still fluid, and there is uncertainty about how the customer identification program requirements will evolve as the rulemaking process continues. Even so, it is already clear that these rules will have significant operational implications for many of our customers.
Regardless of how the regulatory requirements evolve, we want to reassure our customers that we are prepared to support them in meeting their obligations. We are a scaled fund administrator who supports hundreds of clients and are experienced in meeting AML/CFT and KYC compliance requirements in multiple jurisdictions. Our technology and managed service solutions integrate the collection and retention of investor identity documentation into the broader investor onboarding workflow, and support ongoing sanctions screening throughout the lifecycle of an investment fund, making compliance with regulations seamless for you, your LPs, and other stakeholders.
As the rules are clarified, we will have more to say in this area. We are committed to providing these solutions not only to our fund administration clients but to all of our customers subject to these compliance obligations.
For further reading:
Final AML/CFT rule and FinCEN Fact Sheet
Goodwin Procter LLP: FinCEN Adopts Final AML Program Rule for Investment Advisers
Ropes & Gray LLP: FinCEN Finalizes Anti-Money Laundering Program Rule for Investment Advisers
You can also join leaders from Juniper Square, Goodwin Procter LLP, and FS Vector for a live webinar on October 30th at 11 AM PT / 2 PM ET. Our expert panel will summarize the final ruling, explain what is expected from a “risk-based and reasonably designed AML/CFT program,” and delve deeper into the steps your firm can take in the coming months in order to comply. Register now →
This article and the related webinar include general information about regulatory and legal issues. The information provided does not, and is not intended to, constitute legal advice and does not address the circumstances of any particular individual or entity. While we endeavor to provide accurate and timely information as of the date the information was written, information on this website may not constitute the most up-to-date information as of the date it is received, and there is no guarantee that it will continue to be accurate in the future. Juniper Square is not a law firm and does not provide legal services. You should contact a lawyer licensed in your jurisdiction for advice on how the new FinCEN rule impacts your particular circumstances.