Sen. Elizabeth Warren, D-Mass., and Rep. Maxine Waters, D-Calif., are pressing Treasury Secretary Scott Bessent to answer questions on Treasury's decision to postpone the compliance date for its 2024 anti-money laundering rule for investment advisors and "potentially weaken the substance of the final rule."
The Treasury Department said on July 21 that it had postponed the effective date for the rule until Jan. 1, 2028, as it takes a "broad review" of it.
In a letter to Bessent on Thursday, Warren and Waters, along with Sen. Andy Kim, D-N.J., state that the "IA AML rule was designed to close a key vulnerability in U.S. anti-money laundering and countering the financing of terrorism (AML/CFT) requirements for the rapidly growing investment adviser and private fund industries. The decision to delay compliance leaves American national security and economic stability vulnerable.”
The lawmakers warned: “As the industry continues to grow — with $144.6 trillion in assets under management in 2024, a 12 percent increase from 2023 alone — so do the risks it poses to American citizens, our economic and national security, and our democracy.”
They pointed to a 2024 Treasury report that laid out national security risks of failing to close illicit finance gaps in the investment advisor sector.
The report found that:
- IAs have served as an entry point into the U.S. market for illicit proceeds associated with foreign corruption, fraud and tax evasion, as well as billions of dollars ultimately controlled by Russian oligarchs and their associates.
- IAs (including those exempt from SEC registration) and their advised funds, particularly venture capital funds, are also being used by foreign states, most notably the People’s Republic of China and Russia, to access certain technology and services with long-term national security implications through investments in early-stage companies.
- Advisors (RIAs, ERAs and state-registered advisers) have defrauded their clients and stolen their funds.
“The Administration has already taken several steps to roll back illicit finance protections, including disbanding multiple Department of Justice teams tasked with protecting against money laundering and illicit finance and narrowing enforcement of U.S. foreign bribery laws,” the lawmakers wrote.
Warren relayed that she has been pushing for answers on the Trump administration’s attempts to unwind key anti-money laundering rules.
Answers by Oct. 3
Treasury's Financial Crimes Enforcement Network, or FinCEN, issued in February 2024 its long-awaited anti-money laundering rule for advisors.
On June 21, Treasury said that "in order to ensure efficient regulation that appropriately balances costs and benefits," FinCEN will postpone the effective date of the final rule establishing Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers and revisit the scope of the IA AML rule at a future date.
The lawmakers want Bessent to answer no later than Oct. 3 on which external parties drove the decision to postpone and reopen the IA AML rule, the steps the agency will take to counter money laundering without the rule in place, and the agency’s plans to revisit the rule.
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