AML for private fund managers, one year ahead of the new rules

Beginning January 1, 2026, investment managers-including those of private investment vehicles-will be subject to Bank Secrecy Act anti-money laundering (AML) rules issued by the Financial Crimes Enforcement Network (FinCEN)‡ within the U.S. Treasury Department.

For many investment managers, particularly exempt reporting advisers, implementing AML processes will be new territory. These requirements have the potential to slow down investor subscriptions, especially when managers need to gather additional information from investors.

Here are practical suggestions drawn from AML experience with private fund managers. Implementing changes now to create an efficient process that works for both managers and investors, can help you avoid the rush and confusion that often accompanies effective dates for new rules.

Request administrator review

Have your administrator review subscription documents before finalization. This early review helps identify missing information or compliance gaps before documents reach investors, preventing delays from incomplete submissions. Review is especially important for funds domiciled outside the U.S., which are typically more complex and require specific documentation for the applicable jurisdiction(s).

When the subscription packet incorporates required AML data points, the number of documents that are not in good order (NIGO) tends to decrease-along with the back-and-forth communication needed to obtain information not originally requested. The result is a better experience for both the manager and its investors.

Know the required roles

Fulfillment of specific roles may be required: AML compliance officer (AMLCO), money-laundering reporting officer (MLRO) and deputy money-laundering reporting officer (DMLRO). Managers need to evaluate whether to dedicate internal resources to these roles or to outsource them.

Become familiar with the AML screening process

Administrators screen investors, beneficial owners and trustees to confirm customer information provided and ensure compliance with government sanctions. Screening processes also identify negative news, possible political exposure, and governmental fines and sanctions. These screenings are not just initial checks but ongoing monitoring to ensure continued compliance.

Know Your Customer (KYC) information must also be reviewed periodically and when certain trigger events occur, potentially requiring updated documentation.

If one of your investors is flagged as high risk, your administrator will let you know. An elevated risk identified for the investor means more frequent customer reviews. At UMB, these reviews are conducted by our dedicated Bank Secrecy Act (BSA)/AML team embedded in the holding company.

Expect more AML complexity for funds domiciled outside the U.S.

Historically, meeting AML requirements for non-U.S. funds has generally required more detailed information than for U.S. funds. Examples include data about an investor's beneficial owners, authorized persons, or those natural persons who control the investor. Looking ahead to the new rules, expect more of this data to be required for U.S. funds, too.

Adjust your workflows

Create a systematic approach for gathering required materials, including identity verification documents, proof of address, sources of funds, and (for institutional investors) corporate documentation. You may wish to set up automated status tracking and dashboard reports. Be sure to set up systems to be audit-friendly in meeting record-keeping requirements. Consider integrating these new processes with your existing investor onboarding systems to create a seamless experience.

Take into account that additional time could be required to review documents and obtain additional documentation for investors whose subscriptions are not in good order. If the AML process is new to you, you'll want to consider adjusting your workflow to allow for the additional time that may be needed. Many firms are used to obtaining only basic information about an investor prior to accepting the investor into their funds.

Educate clients

Ensure you have good communication with your clients or potential clients from the beginning of the process and educate them on the AML requirements. That way, investors won't be surprised if additional information is requested of them.

Let us know if you'd like to talk about your existing processes for gathering investor information and how we've seen investment managers increase ease and efficiency. UMB has offered AML services to clients for 20+ years and has highly experienced staff who would be happy to discuss the process with you.

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