Elizabeth Warren, Maxine Waters press Treasury on delayed AML rule for investment advisors

A group of Democratic lawmakers is pressing the Treasury Department for answers after the agency postponed a key anti-money-laundering rule for investment advisors, raising concerns about the sector’s vulnerability to illicit finance.

In a letter sent September 18 to Treasury Secretary Scott Bessent, Senator Elizabeth Warren, Congresswoman Maxine Waters, and Congressman Andy Kim questioned the decision to delay the compliance date for the Financial Crimes Enforcement Network’s (FinCEN) investment advisor anti-money-laundering (AML) rule.

The rule, finalized in August last year, was set to take effect January 1, 2026. But the Treasury Department announced last month that the deadline would be pushed back two years to January 1, 2028.

The lawmakers argue that the delay leaves a significant gap in US financial safeguards.

“The investment adviser sector is ‘one of the most significant gaps’ in the United States’ anti-money laundering regime, largely due to a lack of comprehensive AML/CFT regulations that apply across the industry,” they wrote in their joint letter Friday.

Among other risks, the letter suggests advisers to private funds may accept investors without knowing the ultimate sources of funds, making the sector “the only major U.S. capital market actor without a legal obligation to know their clients or perform due diligence.”

The letter also cites national security concerns, noting that foreign entities have targeted US investment advisers as a way to access sensitive technologies and funnel illicit funds.

“Treasury estimates that some advisers may manage billions of dollars ultimately controlled by sanctioned entities – entities that threaten our national interests,” the lawmakers wrote.

FinCEN’s rule, first proposed in 2003 and revived several times since, would require certain investment advisers to establish AML programs and report suspicious activity. The final version issued last year included concessions such as exempting midsize and family advisers and pension consultants, and relaxing requirements for foreign advisers unless they serve US clients.

Industry groups have long argued that earlier versions of the rule were overly burdensome, leading to repeated delays and revisions.

The latest postponement comes as compliance officers across the wealth management sector are increasingly focused on AML issues. According to the most recent Investment Management Compliance Testing Survey findings unveiled in July, 41% of compliance professionals cited AML as a concern this year, up from 6% in 2024, largely due to anticipated regulatory changes. However, only 22% of firms have updated their policies to align with the new rule, and independent testing remains inconsistent.

The Treasury department has said the delay will allow time to tailor the rule to the “diverse business models and risk profiles” of the investment adviser sector, and that extending the effective date “may help ease potential compliance costs for industry.”

But the lawmakers’ letter raises questions about whether the agency plans to weaken or rescind the rule altogether.

The letter pressed the Treasury department to answer several questions by October 3.

Among other details, they asked for clarity on which segments of the industry influenced the decision to postpone the investment adviser AML rule, what interim steps will be taken to counter money laundering, and whether the new 2028 deadline will be upheld.