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Anti-Money Laundering (AML) rules require financial institutions to detect and report suspicious activity that could indicate fraudulent and/or criminal behavior. Financial institutions subject to these rules include banks, credit unions and, beginning in 2028, SEC-registered investment advisors (RIAs) and exempt reporting advisors (ERAs). Affected firms should consider how they can prepare to meet anti-money laundering compliance requirements well ahead of the deadline. 1
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Anti-Money Laundering (AML) Compliance Checklist for Advisors
Historically, financial advisors have largely been excluded from AML compliance requirements, relying instead on their custodians or broker-dealers to enforce them. However, that’s changing following the approval of a final rule that would extend AML to include RIAs and exempt-reporting advisors registered with the SEC. The rule outlines several key requirements for affected advisors:
| What the Rule Requires | How Advisors Can Comply |
|---|---|
| Establish an AML/CFT Program | Develop a written set of formal policies, procedures, and controls outlining how the advisor enforces AML rules and Countering the Financing of Terrorism (CFT) rules. The program must cover risk-based policies and procedures, employee training, assignment of compliance officer duties, independent testing provisions, and procedures for conducting ongoing customer due diligence. |
| Adhere to Know Your Client (KYC) Rules | Verify client identities through a Customer Identification Program (CIP) that collects certain mandatory details, such as the client’s name, date of birth, physical address, and taxpayer identification number. Support verification with documentary evidence, such as a government-issued ID and/or other information obtained through government databases. Perform ongoing due diligence to monitor for suspicious activity and update client risk profiles. |
| Monitor for and Report Suspicious Activity | Establish internal controls to monitor for suspicious activity and flag it for reporting. Submit Suspicious Activity Reports (SARs) to the Financial Crimes Enforcement Network (FinCEN) and maintain copies of all reports filed, along with supporting documentation, for a minimum of five years. |
| Conduct Independent Testing | Schedule assessments of AML/CFT policies and procedures at least annually, and have them completed by an individual who is familiar with Bank Secrecy Act rules to detect potential weak spots or risk areas. Testing may be completed by internal staff who do not directly manage AML tasks or by an external third-party provider. |
You may be curious why RIAs must adhere to anti-money laundering compliance rules now when they haven’t had to do so in the past. In short, it’s because FinCEN chose to classify them as financial institutions under the Bank Secrecy Act. In implementing the final rule, FinCEN is attempting to close a regulatory gap and target financial crimes in the advisory sector.
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How RIAs Can Prepare for Anti-Money Laundering Compliance
The compliance deadline for the final rule is January 1, 2028. If you’re reading this in 2026, or even in 2027, you still have time to prepare your firm for the upcoming changes. In addition to familiarizing yourself with what’s required, there are some other steps you can take to help you and your team get ahead of the compliance curve.
Review Existing Compliance Protocols
If you’re dual-registered as both a broker-dealer and RIA, you may already comply with AML requirements that apply to broker-dealers. The Bank Secrecy Act applies to all broker-dealers, without exception. 2
Should this not apply to you, consider what policies or procedures you may already have in place that reflect AML rule requirements. Comparing your existing controls against what you’re required to implement by the 2028 deadline can help you pinpoint significant gaps that must be addressed.
Centralize Compliance Oversight
Consider appointing someone from your team to oversee the implementation process. Your chief compliance officer (CCO) is a likely candidate, though you may opt to select someone else if they have relevant experience with AML/CFT compliance.
Once you make your choice, outline the tasks and duties they and other team members will be responsible for as you prepare for implementation. Establish a schedule for regular progress updates to help keep everyone on track.
Arrange for Staff Training
After you draft your firm’s AML/CFT policies and procedures, block off time to bring your staff up to speed. Holding one or more dedicated training sessions is an opportunity to help everyone get on the same page about what’s required and how to adhere to KYC and SAR requirements.
Vet Your Vendors
If you work with third-party vendors, ask how their business model aligns with AML/CFT requirements. Should you need to replace a vendor due to compliance concerns, you don’t want to wait until the last minute to make the change.
Regularly vetting your vendors can also help you prepare for an SEC examination when the time comes. The SEC listed third-party vendors as an exam priority for 2026, with particular focus on how vendors handle cybersecurity and data privacy.
Stress Test Your Plan Before the Implementation Deadline
Independent testing is a core component of AML compliance, so it makes sense to do some preliminary testing of your systems before the final rule implementation deadline. Running a simulated exercise is an opportunity to assess your staff’s response to suspicious activity and locate compliance gaps in your plan. You can take what you learn from the exercise and use the data to refine your program to close those gaps.
AML Compliance Tech Tools for Advisors
To help manage compliance, tech tools could be a game-changing ally. Systems like Oracle Financial Services Anti-Money Laundering, SAS Anti-Money Laundering and Thomson Reuters World-Check can automate compliance processes.
Systems like these can help by reducing the risk of manual errors and quickly identifying suspicious activity. Each of these tools provides unique benefits. Oracle Financial, for example, uses machine learning for advanced analytics, whereas SAS uses network analytics for better risk detection.
As you compare tools, consider the features, functionality, user experience, support and cost. Remember that while technology can make AML compliance easier to manage, it doesn’t replace the human expertise and precision that a dedicated financial advisor can provide.
Frequently Asked Questions (FAQs)
Do RIAs Have AML Requirements?
FinCEN issued a final rule in 2024 that imposes anti-money laundering compliance requirements on SEC-registered investment advisors and exempt-reporting advisors. Implementation of the final rule has been delayed until January 1, 2028, at which time advisors who fail to meet compliance rules may be subject to penalties and other enforcement actions.
What Are the Five Pillars of AML Compliance?
The five pillars of AML compliance are developing written internal policies and controls for managing risk, designating a qualified person to act as chief compliance officer, holding ongoing employee training to support employees’ understanding of AML rules, conducting independent testing and performing customer due diligence.
What Are the Consequences of Non-Compliance With AML?
Failing to comply with AML rules can result in substantial fines, sanctions, and/or criminal charges. RIAs who fail to meet AML standards could face a temporary or permanent suspension of their registration status. Failing to comply with these rules could also result in brand damage if clients have concerns about your ethical standards.
Bottom Line
Preparing for AML compliance may take time, but advisors can use the runway before 2028 to review policies, assign responsibilities, train staff and evaluate technology. With the right knowledge, process-oriented thinking, prudent use of technology and potentially the help of an experienced financial advisor, advisory firms can fortify against money laundering.
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Article Sources
All articles are reviewed and updated by SmartAsset’s fact-checkers for accuracy. Visit our Editorial Policy for more details on our overall journalistic standards.
- Delaying the Effective Date of the Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers. Federal Register, 2 Jan. 2026, https://www.federalregister.gov/documents/2026/01/02/2025-24184/delaying-the-effective-date-of-the-anti-money-launderingcountering-the-financing-of-terrorism.
- Frequently Asked Questions (FAQ) Regarding Anti-Money Laundering (AML). FINRA, https://www.finra.org/rules-guidance/key-topics/aml/faq.