Is Your RIA Ready For the 2026 FinCEN AML Requirements?
In a significant move to combat illicit financial activities, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) has issued two final rules targeting investment advisers and the residential real estate sector. These regulations, effective December 1, 2025, for real estate and January 1, 2026, for investment advisers, aim to enhance transparency and strengthen anti-money laundering (AML) and countering the financing of terrorism (CFT) measures across these industries.
Investment Adviser Rule
The new rule expands the definition of "financial institution" under the Bank Secrecy Act (BSA) to include certain investment advisers. This change mandates that covered investment advisers implement robust AML/CFT programs and report suspicious activities to FinCEN. The rule specifically applies to:
Registered Investment Advisers (RIAs): Those registered or required to register with the Securities and Exchange Commission (SEC).
Exempt Reporting Advisers (ERAs): Advisers reporting to the SEC as exempt under specific criteria.
Notably, the rule excludes certain mid-sized, multi-state advisers, and pension consultants from its scope. Additionally, for foreign-located investment advisers, the rule applies only to advisory activities conducted within the U.S. or services provided to U.S. persons or entities.
Residential Real Estate Rule
To address vulnerabilities in the real estate market, FinCEN's new regulation requires industry professionals to report non-financed (e.g., all-cash) transfers of residential real estate to legal entities or trusts. This measure aims to prevent illicit actors from exploiting the real estate sector to launder money or conceal assets. Key aspects include:
Scope: The rule focuses on transactions where residential properties are acquired without financing and the purchaser is a legal entity or trust.
Exemptions: Transfers made directly to individuals are not covered under this rule.
These regulations are part of a broader strategy outlined in the 2021 U.S. Strategy on Countering Corruption, aiming to close gaps that allow illicit financial flows through investment advisers and real estate transactions. By enforcing these rules, FinCEN seeks to enhance the integrity of the U.S. financial system and deter misuse by bad actors.
Industry participants are encouraged to familiarize themselves with these new requirements and prepare for their implementation to ensure compliance and contribute to the broader effort of combating financial crimes.
