Regulators are considering extending anti-money laundering laws to include investment advisers, a move that could significantly impact the compliance burden for advisory firms. The proposal, presented by the U.S. Treasury Department's Financial Crimes Enforcement Network (FinCEN), aims to subject registered investment advisory firms to the same anti-money laundering provisions as banks and broker-dealers.

As reported by FinancialPlanning.com, if implemented, the rule would require advisory firms with $110 million or more under management to comply with stringent recordkeeping requirements and report suspicious activities to FinCEN. According to FinCEN estimates, this could result in an average of 60 suspicious activity reports filed annually by each firm.

The proposal primarily targets the more than 15,000 independent advisory firms registered at the federal level with the Securities and Exchange Commission (SEC) and exempt reporting advisers working with private funds and venture capital funds. Those firms would fall under FinCEN's jurisdiction, enabling the SEC to examine them for money laundering violations. However, the proposed regulations would exclude approximately 17,000 advisers registered only at the state level. The Treasury Department cited these firms' relatively small size and limited resources, along with minimal instances of illicit financial activities, as reasons for their exemption.

While the Treasury has previously introduced similar proposals that failed to gain traction, the current push comes amid heightened concerns over money laundering's potential role in financing international conflicts and undermining cybersecurity. Critics, including industry representatives, express apprehension about the added regulatory burden, particularly for smaller firms, and warn of potential overlap with existing anti-fraud regulations already governing advisory practices.

Financial Advisor Transitions consults advisors nationwide to explore employment transition options and to preserve and protect their practice in any transition that they make.