by Joel Cohen, Tami Stark, Claudette Druehl, Marietou Diouf, and Jason Ho
Left to proper: Joel Cohen, Tami Stark, Claudette Druehl, Marietou Diouf and Jason Ho (Pictures courtesy of the authors)
The U.S. Securities & Alternate Fee (“SEC”) not too long ago introduced settled prices towards an funding adviser for misrepresentations relating to its anti-money laundering (“AML”) procedures and compliance failures.[1] As we outlined in our current shopper alert, funding advisers shall be required by the Monetary Crimes Enforcement Community (“FinCEN”) to implement an AML program by January 1, 2026. This SEC motion doesn’t shed new mild on the scope of SEC jurisdiction over AML. As an alternative, it serves as a reminder that if an funding adviser says it’s voluntarily complying with AML due diligence legal guidelines by conducting AML due diligence, it wants to take action. An funding adviser should additionally precisely describe its AML program as soon as the anticipated AML requirement for funding advisers commences.
In accordance with the SEC’s order, the funding adviser acknowledged in its providing memoranda and different disclosure paperwork supplied to buyers that the corporate was voluntarily complying with AML necessities, though these legal guidelines didn’t particularly apply to funding advisers.[2] The funding adviser acknowledged to buyers that it carried out particular AML due diligence opinions in relation to potential buyers and had ongoing monitoring of present buyers. The SEC discovered that these statements weren’t correct. Because of this, amongst different issues, the SEC ordered the funding adviser to pay $150,000 in civil cash penalties.
Traditionally, funding advisers haven’t been topic to compliance imposed by the Financial institution Secrecy Act because it pertains to AML procedures and countering the financing of terrorism (“CFT”) necessities. In fall 2024, FinCEN, a bureau of the Division of Treasury, adopted guidelines subjecting most funding advisers to elevated regulatory necessities together with the implementation of an AML program.
Though the funding adviser was not but legally required to adjust to AML legal guidelines, the SEC acknowledged that bringing the motion reinforces the obligation of funding advisers to not mislead buyers associated to the extent of funding threat being undertaken and to carry out the duties they’re representing are being accomplished.[3] The SEC discovered that the corporate didn’t at all times carry out the AML due diligence because it was described in its choices and different paperwork.
As a reminder, obligations beneath the brand new FinCEN rule embrace an AML/CFT program that’s risk-based and fairly designed, in addition to the adoption of insurance policies and controls, “to stop the funding adviser from getting used for cash laundering, terrorist financing, or different illicit finance actions.”[4]
It’s important that each one funding advisers make sure the implementation of adequate inner controls, together with insurance policies and procedures, to handle the AML necessities by the compliance deadline of the brand new FinCEN AML rule. This current SEC exercise alerts the significance of making certain each an sufficient AML program and correct disclosure are in place. Whereas it’s tough to foretell whether or not AML will proceed to be an necessary initiative beneath the brand new administration, corporations ought to concentrate on any upcoming AML necessities as a result of they are often the tactic through which the SEC seeks to search out chargeable offenses when an investigation doesn’t discover adequate proof of extra severe prices. We need to reiterate the significance that funding advisers seek the advice of with counsel to make sure the sufficiency of present and upcoming AML applications to make sure such applications will face up to regulatory examination. As well as, funding advisers ought to proceed to make sure that all disclosure to buyers is correct.
Footnotes
[1] https://www.sec.gov/newsroom/press-releases/2025-8?utm_medium=electronic mail&utm_source=govdelivery
[2] https://www.sec.gov/recordsdata/litigation/admin/2025/ia-6823.pdf
[3] https://www.sec.gov/newsroom/press-releases/2025-8?utm_medium=electronic mail&utm_source=govdelivery
[4] https://www.whitecase.com/insight-alert/fincen-issues-final-sweeping-aml-requirements-registered-investment-advisers-eras
Joel Cohen and Tami Stark are Companions, Claudette Druehl and Marietou Diouf are Counsel, and Jason Ho is an Affiliate at White & Case LLP. This publish first appeared on the agency’s weblog.
The views, opinions and positions expressed inside all posts are these of the creator(s) alone and don’t symbolize these of the Program on Company Compliance and Enforcement (PCCE) or of the New York College Faculty of Regulation. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this website and won’t be liable any errors, omissions or representations. The copyright of this content material belongs to the creator(s) and any legal responsibility with reference to infringement of mental property rights stays with the creator(s).
by Joel Cohen, Tami Stark, Claudette Druehl, Marietou Diouf, and Jason Ho
Left to proper: Joel Cohen, Tami Stark, Claudette Druehl, Marietou Diouf and Jason Ho (Pictures courtesy of the authors)
The U.S. Securities & Alternate Fee (“SEC”) not too long ago introduced settled prices towards an funding adviser for misrepresentations relating to its anti-money laundering (“AML”) procedures and compliance failures.[1] As we outlined in our current shopper alert, funding advisers shall be required by the Monetary Crimes Enforcement Community (“FinCEN”) to implement an AML program by January 1, 2026. This SEC motion doesn’t shed new mild on the scope of SEC jurisdiction over AML. As an alternative, it serves as a reminder that if an funding adviser says it’s voluntarily complying with AML due diligence legal guidelines by conducting AML due diligence, it wants to take action. An funding adviser should additionally precisely describe its AML program as soon as the anticipated AML requirement for funding advisers commences.
In accordance with the SEC’s order, the funding adviser acknowledged in its providing memoranda and different disclosure paperwork supplied to buyers that the corporate was voluntarily complying with AML necessities, though these legal guidelines didn’t particularly apply to funding advisers.[2] The funding adviser acknowledged to buyers that it carried out particular AML due diligence opinions in relation to potential buyers and had ongoing monitoring of present buyers. The SEC discovered that these statements weren’t correct. Because of this, amongst different issues, the SEC ordered the funding adviser to pay $150,000 in civil cash penalties.
Traditionally, funding advisers haven’t been topic to compliance imposed by the Financial institution Secrecy Act because it pertains to AML procedures and countering the financing of terrorism (“CFT”) necessities. In fall 2024, FinCEN, a bureau of the Division of Treasury, adopted guidelines subjecting most funding advisers to elevated regulatory necessities together with the implementation of an AML program.
Though the funding adviser was not but legally required to adjust to AML legal guidelines, the SEC acknowledged that bringing the motion reinforces the obligation of funding advisers to not mislead buyers associated to the extent of funding threat being undertaken and to carry out the duties they’re representing are being accomplished.[3] The SEC discovered that the corporate didn’t at all times carry out the AML due diligence because it was described in its choices and different paperwork.
As a reminder, obligations beneath the brand new FinCEN rule embrace an AML/CFT program that’s risk-based and fairly designed, in addition to the adoption of insurance policies and controls, “to stop the funding adviser from getting used for cash laundering, terrorist financing, or different illicit finance actions.”[4]
It’s important that each one funding advisers make sure the implementation of adequate inner controls, together with insurance policies and procedures, to handle the AML necessities by the compliance deadline of the brand new FinCEN AML rule. This current SEC exercise alerts the significance of making certain each an sufficient AML program and correct disclosure are in place. Whereas it’s tough to foretell whether or not AML will proceed to be an necessary initiative beneath the brand new administration, corporations ought to concentrate on any upcoming AML necessities as a result of they are often the tactic through which the SEC seeks to search out chargeable offenses when an investigation doesn’t discover adequate proof of extra severe prices. We need to reiterate the significance that funding advisers seek the advice of with counsel to make sure the sufficiency of present and upcoming AML applications to make sure such applications will face up to regulatory examination. As well as, funding advisers ought to proceed to make sure that all disclosure to buyers is correct.
Footnotes
[1] https://www.sec.gov/newsroom/press-releases/2025-8?utm_medium=electronic mail&utm_source=govdelivery
[2] https://www.sec.gov/recordsdata/litigation/admin/2025/ia-6823.pdf
[3] https://www.sec.gov/newsroom/press-releases/2025-8?utm_medium=electronic mail&utm_source=govdelivery
[4] https://www.whitecase.com/insight-alert/fincen-issues-final-sweeping-aml-requirements-registered-investment-advisers-eras
Joel Cohen and Tami Stark are Companions, Claudette Druehl and Marietou Diouf are Counsel, and Jason Ho is an Affiliate at White & Case LLP. This publish first appeared on the agency’s weblog.
The views, opinions and positions expressed inside all posts are these of the creator(s) alone and don’t symbolize these of the Program on Company Compliance and Enforcement (PCCE) or of the New York College Faculty of Regulation. PCCE makes no representations as to the accuracy, completeness and validity or any statements made on this website and won’t be liable any errors, omissions or representations. The copyright of this content material belongs to the creator(s) and any legal responsibility with reference to infringement of mental property rights stays with the creator(s).
