The proposed rule seeks to prevent illicit finance activity involving the customers of

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FACT SHEET 
Customer 
Identification 
Programs 
U.S. SECURITIES AND EXCHANGE COMMISSION  PAGE 1 OF 2 
 
Why This Matters 
The  proposed  rule  seeks  to  prevent illicit  finance  activity  involving  the  customers  of 
investment advisers by strengthening the anti   -money laundering/countering the financing of 
terrorism (AML/CFT) framework for the investment adviser sector. If adopted, this CIP rule 
would make it more difficult for criminal, corrupt, and illicit actors to use investment advisers 
as an entry point into the U.S. financial system.
   
Among other requirements, the proposed rule seeks to require RIAs and ERAs to implement 
reasonable procedures to identify and verify the identities of their customers. The proposal 
is  generally  consistent  with  the  CIP  requirements  for  other  financial  institutions,  such  as  
brokers or dealers and mutual funds, and are designed to align with the CIP requirements 
across these financial  institutions.  Under  these  proposed  requirements,  this  rulemaking  
would  make  it  more  difficult  for  persons  to  use  false  identities  to  establish  customer  
relationships  with  investment  advisers  for  the  purposes  of  laundering  money,  financing  
terrorism, or engaging in other illicit finance activity. 
This rulemaking complements a separate FinCEN proposal to designate RIAs and ERAs as 
“financial institutions” under the Bank Secrecy Act and subject them to AML/CFT program 
requirements, as well as obligations to file suspicious activity reports.
1
 That proposal cites a 
Treasury risk assessment that identified that the investment adviser industry has served as 
an  entry  point  into  the  U.S.  market  for  illicit  proceeds  associated  with  foreign  corruption,  
fraud, tax evasion, and other criminal activities. 
 
 
 
1
 See FinCEN, Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements 
for Registered Investment Advisers and Exempt Reporting Advisers, Notice of Proposed Rulemaking, 89 FR 12108 (Feb. 15, 2024). 
 
On May 13, 2024, the Securities and Exchange Commission (SEC) and the U.S. Department 
of the Treasury’s Financial Crimes Enforcement Network (FinCEN) issued a joint notice of 
proposed rulemaking (NPRM) to apply customer identification program (CIP) obligations to 
certain investment advisers. The proposed rule would require SEC-registered investment 
advisers (RIAs) and exempt reporting advisers (ERAs) to, among other things, implement a 
CIP that includes procedures for:  
●    verifying the identity of each customer to the extent reasonable and practicable; and 
●    maintaining records of the information used to verify a customer’s identity, including 
name, address, and other identifying information.  
 

FACT SHEET | Customer Identification Programs for Registered Investment Advisers and Exempt Reporting 
Advisers 
 
U.S. SECURITIES AND EXCHANGE COMMISSION  PAGE 2 OF 2 
What This Proposal Would Do 
The  proposal  would require RIAs  and  ERAs to, among other things,  establish,  document,  
and maintain  written  CIPs   appropriate for their respective sizes   and  businesses.  The  CIP  
would include risk-based procedures for verifying the identity of each customer to the extent 
reasonable and practicable
 within a reasonable time before or after the customer’s account 
is  opened.  The  procedures  would  have  to  enable  the  RIA  and  ERA  to  form  a  reasonable  
belief that it knows the true identity of each customer. RIAs and ERAs would be required to 
obtain
 certain identifying information with respect to each customer, such as the customer’s 
name, date of birth or date of formation, address, and identification number.  
The  proposed  rule  would  also  include  procedures  for,  among  other  things,  maintaining 
records of the information used to verify a customer’s identity and notifying customers   that 
the adviser is requesting information to verify their identities.  
 
Additional Information: 
The proposal will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 
days after publication in the Federal Register. 
 

FACT SHEET
Customer Identification Programs

On May 13, 2024, the Securities and Exchange Commission (SEC) and the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) issued a joint notice of proposed rulemaking (NPRM) to apply customer identification program (CIP) obligations to certain investment advisers. The proposed rule would require SEC-registered investment advisers (RIAs) and exempt reporting advisers (ERAs) to, among other things, implement a CIP that includes procedures for:
- verifying the identity of each customer to the extent reasonable and practicable; and
- maintaining records of the information used to verify a customer's identity, including name, address, and other identifying information.

Why This Matters

The proposed rule seeks to prevent illicit finance activity involving the customers of investment advisers by strengthening the anti-money laundering/countering the financing of terrorism (AML/CFT) framework for the investment adviser sector. If adopted, this CIP rule would make it more difficult for criminal, corrupt, and illicit actors to use investment advisers as an entry point into the U.S. financial system.

Among other requirements, the proposed rule seeks to require RIAs and ERAs to implement reasonable procedures to identify and verify the identities of their customers. The proposal is generally consistent with the CIP requirements for other financial institutions, such as brokers or dealers and mutual funds, and are designed to align with the CIP requirements across these financial institutions. Under these proposed requirements, this rulemaking would make it more difficult for persons to use false identities to establish customer relationships with investment advisers for the purposes of laundering money, financing terrorism, or engaging in other illicit finance activity.

This rulemaking complements a separate FinCEN proposal to designate RIAs and ERAs as "financial institutions" under the Bank Secrecy Act and subject them to AML/CFT program requirements, as well as obligations to file suspicious activity reports.1 That proposal cites a Treasury risk assessment that identified that the investment adviser industry has served as an entry point into the U.S. market for illicit proceeds associated with foreign corruption, fraud, tax evasion, and other criminal activities.

1 See FinCEN, Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers, Notice of Proposed Rulemaking, 89 FR 12108 (Feb. 15, 2024).

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FACT SHEET | Customer Identification Programs for Registered Investment Advisers and Exempt Reporting Advisers

What This Proposal Would Do

The proposal would require RIAs and ERAs to, among other things, establish, document, and maintain written CIPs appropriate for their respective sizes and businesses. The CIP would include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable within a reasonable time before or after the customer’s account is opened. The procedures would have to enable the RIA and ERA to form a reasonable belief that it knows the true identity of each customer. RIAs and ERAs would be required to obtain certain identifying information with respect to each customer, such as the customer’s name, date of birth or date of formation, address, and identification number.

The proposed rule would also include procedures for, among other things, maintaining records of the information used to verify a customer’s identity and notifying customers that the adviser is requesting information to verify their identities.

Additional Information:

The proposal will be published on SEC.gov and in the Federal Register. The public comment period will remain open for 60 days after publication in the Federal Register.

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