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Articles + Publications October 9, 2024
FUNDamentals™ Series
Troutman Pepper Locke published an update in July 2025. Please click here to read the update.
On August 28, 2024, the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a final rule (the “Rule”) that amends the definition of “financial institution” under the Bank Secrecy Act (“BSA”) to include certain investment advisers. The Rule will require covered investment advisers to, among other things, report suspicious banking activity by their individual clients and investors in pooled investment vehicles to FinCEN pursuant to the BSA. The Rule will take effect on January 1, 2026. Concurrently on August 28, 2024, FinCEN issued a Fact Sheet that provides additional information regarding these requirements.
The Rule requires (i) investment advisers registered with (or required to be registered with) the U.S. Securities and Exchange Commission (“SEC”) and (ii) advisers that report to the SEC as exempt reporting advisers (together, “Covered Investment Advisers”)[1] to implement anti-money laundering and anti-terrorist finance (“AML/TF”) compliance programs, report suspicious activities, and conduct customer due diligence (“CDD”) with respect to their clients (including investors in collective investment vehicles advised by Covered Investment Advisers). In addition, with regard foreign private advisers, the Rule only applies to advisory activities that (i) take place within the United States, including through the involvement of U.S. personnel of the investment adviser or (ii) the provision of advisory services to a U.S. person or a foreign-located private fund with an investor that is a U.S. person.
FinCEN supports the need for the Rule by stating that (i) Covered Investment Advisers, the U.S. financial system, and U.S. economy have been exploited with “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, (ii) investment advisers, including those exempt from Securities and Exchange Commission (SEC) registration, and their private funds, particularly venture capital funds, are being used by foreign states, most notably the People’s Republic of China (PRC) and Russia, to access U.S. technology and services with long-term national security implications through investments in early-stage companies, and (iii) there are numerous examples of investment advisers defrauding their customers and stealing their funds.
While many Covered Investment Advisers have already implemented anti-money laundering programs,[2] to comply with this Rule, Covered Investment Advisers will be required to assess their specific AML risks, review their compliance infrastructure, and ensure that their compliance programs align with FinCEN’s requirements. Failure to comply could result in significant penalties and reputational damage. In short, the new Rule will require Covered Investment Advisers to review and possibly update their existing AML/TF compliance programs.
Key Provisions of the Final Rule
Importance of Compliance
To comply with the Rule, Covered Investment Advisers must take prompt action to assess their AML/TF risks, review their compliance infrastructure, and ensure that their programs align with FinCEN’s requirements. Failure to comply could result in significant penalties and reputational damage. These regulatory updates increase Covered Investment Advisers responsibility to protect against financial crimes. For investment advisory clients, the Rule will require greater cooperation with Covered Investment Advisers so that the Covered Investment Advisers can enhance the overall security and transparency of their investment activities.
Conclusion
This paper is intended as a guide only and is not a substitute for specific legal or tax advice. Please reach out to the authors for any specific questions. We expect to continue to monitor the topics addressed in this paper and provide future client updates when useful.
—
[1] Covered Investment Advisers does not include state-registered investment advisers or family offices.
[2] Many investment advisers have contracted with the fund administrators to conduct AML/TF due diligence and certain screening efforts are also enhanced by bank screening when investor funds are received or distributed.
[3] In summary, if a Covered Investment Adviser (generally, on behalf of a client) receives currency from an investor in excess of $10,000 in one or more related transactions during a 12-month period, it must report the receipt of such currency by filing a Form 8300. Form 8300 is a joint IRS and FinCEN form that may be electronically filed with FinCEN.
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Going Through Withdrawal: Dealing with Multiemployer Pension Plan Withdrawal Liability
September 30, 2025 | 11:00 AM – 12:00 PM CT
Webinar
Leading the energy evolution.
Learn more
From compliance to the courtroom, we have you covered.
Learn more
Helping you focus on what matters – improving human health.
Learn more
Trusted advisors to leading insurers for 100+ years.
Learn more
Unlocking value in the middle market and beyond.
Learn more
Full-service legal advice from coast to coast.
Learn more
Applying radical applications of common sense
Explore More
Our standard-setting client experience program.
Explore more
Delivering life-changing help to those most in need.
Explore More
Our firm’s greatest asset is our people.
Explore More
Market-leading eDiscovery and data management services.
Explore more
The Pepper Center for Public Services
Explore more
Strategies helps businesses and individuals solve the complexities of dealing with the government at every level. Our team of specialists concentrate exclusively on government affairs, representing clients nationwide who need assistance with public policy, advocacy, and government relations strategies.
This unique program provides innovative and affordable opportunities to startups and early-stage emerging companies with a solid technology or scientific foundation. We help companies that have a quality management team in place and do not have other significant legal representation.
eMerge’s lawyers and technologists work together to deliver strategic end-to-end eDiscovery and data management solutions for litigation, investigations, due diligence, and compliance matters. We help clients discover the information necessary to resolve disputes, respond to investigations, conduct due diligence, and comply with legal requirements.
Stay ahead of the curve and in touch with our latest thinking on the issues that are top of mind across our practices and industry sectors.
Change happens fast in today’s turbulent world. Stay on top of the latest with our industry-specific channels.
Take a closer look at how we partner with clients to help them realize their goals.