Recent SEC AML Enforcement Actions and Likely Continued AML Emphasis Under New Administration

Registered investment advisers have until January 1, 2026, to comply with the anti-money laundering (AML) compliance provisions of the Bank Secrecy Act (BSA). However, the SEC has recently charged two investment advisers with securities law violations arising out of their failed AML compliance programs.

On January 14, 2025, the SEC announced charges against investment adviser Navy Capital Green Management LLC arising out of misrepresentations related to Navy Capital’s AML program and associated compliances failures. The SEC found that Navy Capital had stated in offering and other documents provided to private fund investors that the firm was voluntarily complying with AML due diligence laws despite those laws not yet applying to investment advisers, including by conducting specific types of AML due diligence on prospective investors and conducting ongoing AML due diligence monitoring on existing investors. According to the SEC’s order, Navy Capital’s private fund investors included multiple foreign-based entities with opaque beneficial ownership and sources of wealth. The order further found that Navy Capital did not, in fact, always conduct the AML due diligence as described, including with respect to an entity owned by an individual publicly reported to have suspected connections to money laundering activities. Indeed, as noted in the order, a foreign court eventually froze the assets of one of Navy Capital’s private funds because it held funds from that investor. Finally, the order found that Navy Capital failed to adopt and implement written policies and procedures reasonably designed to ensure the accuracy of offering and other documents provided to prospective and existing investors. To resolve the charges, Navy Capital paid a monetary penalty in the amount of $150,000.

Three days later, on January 17, 2025, the SEC announced charges against broker-dealer and investment adviser LPL Financial LLC for multiple failures related to its AML program. In its order, the SEC found that LPL Financial experienced long-standing failures in its customer identification program, including a failure to timely close accounts for which it had not properly verified the customer’s identity. According to the order, LPL Financial failed to close or restrict thousands of high-risk accounts, such as cannabis-related and foreign accounts, which were prohibited under LPL Financial’s AML policy. To resolve the charges, LPL Financial paid a monetary penalty in the amount of $18 million and agreed to implement improvements in its AML policies and procedures.

Although the change in administration has cast some doubt on the regulatory landscape, these companion cases reflect the SEC’s continued scrutiny of AML compliance programs, consistent with the agency’s stated examination priorities for 2025.

Those priorities expressly include reviewing whether broker-dealers and registered investment companies are:

• Appropriately tailoring their AML program to their business model and associated AML risks.
• Conducting independent testing.
• Establishing an adequate customer identification program, including for beneficial owners of legal entity customers.
• Meeting their suspicious activity report (SAR) filing obligations.

And additionally with respect to investment advisers:

• Monitoring and complying with the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctions regime.

In addition, at the Investment Adviser Association’s 2025 Investment Adviser Compliance Conference, Keith Cassidy, acting director of the SEC’s examinations division, and Corey Schuster, co-chief of the SEC enforcement division’s asset management unit, indicated that agency staff is working closely with the new administration to implement the rule requiring that investment advisers comply with the AML compliance provisions of the BSA by January 1, 2026. For more information on that rule, see “Deadline Approaches for RIAs to Adopt AML Programs: CIP Requirements Remain in Limbo,” Expect Focus – Life, Annuity, and Retirement Solutions (January 2025).

Among other considerations, FinCEN has delegated to the SEC examination authority over investment adviser compliance with the new rule. Thus, the SEC is building onto its existing framework for overseeing AML compliance programs, including by ensuring that programs properly detect and deter cross-border money laundering activity. These SEC requirements will complement the administration’s efforts, through executive orders and presidential memoranda, to combat foreign actors believed to threaten American institutions, such as by sanctioning international drug trafficking organizations, as well as imposing new tariffs against China.

Accordingly, it is more important than ever for SEC-regulated institutions to adopt effective and legally compliant AML programs in advance of any routine examinations.