AML Compliance for Private Funds: Spring 2026 Regulatory Update

Welcome to our latest AML Round-Up, covering key regulatory developments affecting AML compliance for private funds over February, March and April 2026, including: 

• Proposed reforms from FINCEN to fundamentally reshape AML/CFT programmes, with a stronger focus on effectiveness and proportionality—directly impacting private markets firms operating as broker-dealers, and more broadly through heightened AML expectations from banking partners. 

• Consultations from Anti-Money Laundering Authority (AMLA) on customer due diligence and risk management, alongside its strategic priorities for tackling money laundering over the next two years.  

• Supervisory priorities from Commission de Surveillance du Secteur Financier (CSSF), emphasising strong control of ML/FT/PF risks through a risk-based supervisory approach.  

• Updated sanctions legislation in Jersey, clarifying that prohibitions extend to entities owned or controlled by designated persons—not just the individuals themselves—and expanding related reporting obligations.  

• Synthetic data research from the UK Financial Conduct Authority and the Alan Turing Institute, exploring AI-enabled approaches to financial crime detection without exposing sensitive data. 

• AI policy guidance from the Guernsey Financial Services Commission, and findings from its thematic review of conflicts of interest in investment and fiduciary firms. 

• FATF grey list update, with Kuwait and Papua New Guinea added at the February 2026 plenary – with no removals in this cycle. 

Across jurisdictions, the direction of travel points to AML moving beyond process toward proving outcomes. Regulators are raising expectations around effectiveness, accountability and enforcement, while encouraging a more focused, risk-based and proportionate approach. At the same time, data, technology and greater cross-border coordination are moving to the centre of how firms manage financial crime risk. 

For questions on the developments covered in this update, or to find out how Sonata One can support you with AML compliance across the fund lifecycle, please reach out to Louis Dodd or Askender Ouazzani. 

AML Compliance for Private Funds: Key Upcoming Deadlines 

AMLA CDD RTS consultation (8 May 2026);  

FinCEN AML/CFT rule comment period (9 June 2026);  

AMLA Risk Assessment consultations (15 July 2026). 

United States 

Launch of Webpage for Whistleblower Tips – On 13 February 2026, the U.S. Treasury’s Financial Crimes Enforcement Network launched a dedicated webpage to confidentially accept whistleblower tips on fraud, money laundering, and sanctions violations, offering financial rewards for tips that lead to enforcement action—signalling heightened enforcement risk and the need for stronger AML controls. The move forms part of a broader crackdown, including increased oversight of money services businesses, enhanced reporting to accelerate prosecutions, and a new IRS task force targeting misuse of charitable entities.  

FinCEN Beneficial Ownership – Reduced Duplication and Narrowed Scope – Recent developments from FinCEN, including the February 2026 exceptive relief under the Customer Due Diligence (CDD) Rule and the March 2025 interim final rule under the Corporate Transparency Act (CTA), collectively signal a shift toward reducing duplicative beneficial ownership requirements while narrowing the scope of reporting obligations. 

Under the CDD exceptive relief, covered financial institutions are no longer required to re-verify beneficial ownership information each time an existing legal entity client opens a new account, unless there is reason to doubt the accuracy of the information or risk-based triggers apply. Verification remains mandatory at onboarding and must be updated where risk profiles change or suspicious activity is identified. 

In parallel, the CTA rollback removes the requirement for US-created entities (including former “domestic reporting companies”) to report beneficial ownership information to FinCEN. Taken together, these changes are particularly relevant for US-formed fund vehicles: while the regulatory burden of duplicative reporting and re-verification has been reduced, firms must continue to rely on robust, risk-based CDD processes to ensure beneficial ownership information remains accurate and up to date. 

Historic $80 Million Penalty for BSA Violations – On 6 March 2026, FinCEN imposed an $80 million penalty on Canaccord Genuity LLC for violations of the Bank Secrecy Act, the largest-ever AML penalty against a broker-dealer. The firm was found to have significant AML control failures, including inadequate customer due diligence, weak transaction monitoring, and failure to meet SAR reporting obligations. For private markets firms, this penalty underscores the expectation that AML controls must be genuinely effective – not merely documented – and that broker-dealers in particular face significant enforcement exposure where transaction monitoring and SAR obligations are not robustly implemented. 

Proposed Rule to Reform AML/CFT Programs – On 7 April 2026, FinCEN proposed a rule to fundamentally reform financial institutions’ anti-money laundering and countering the financing of terrorism programs under the BSA. The rule aims to shift the focus from procedural compliance to effectiveness and risk-based controls, giving financial institutions greater flexibility to prioritise higher-risk areas and reduce low-value reporting burdens. It also seeks to clarify supervisory expectations, particularly around audit and independent testing, and reinforce FinCEN’s central role in AML oversight through closer coordination with federal banking regulators. The proposal would replace earlier draft rules and align the framework with the Anti-Money Laundering Act of 2020, with public consultation open until 9 June 2026. Read our recent update on the proposed rule here.  

GENIUS Act – FinCEN/OFAC Proposed Rule on Stablecoins On 8 April 2026, FinCEN and OFAC issued a joint Notice of Proposed Rulemaking to implement the AML and sanctions compliance provisions of the GENIUS Act for permitted payment stablecoin issuers (PPSIs), which would treat PPSIs as “financial institutions” under the Bank Secrecy Act and — for the first time — explicitly mandate that a category of US persons maintain an effective sanctions compliance programme. Comments are due 9 June 2026, the same deadline as the AML/CFT reform rule already covered in the newsletter. For managers with exposure to digital assets or tokenised fund structures, this is very relevant context. 

European Union 

AMLA Sets Strategic Priorities – On 4 February 2026, AMLA published its Single Programming Document for 2026–2028 setting out its first multi-year workplan, marking its transition from setup phase to full delivery and providing a roadmap for the market.  The plan centres on completing the Single Rulebook, driving supervisory convergence, and strengthening cooperation between Financial Intelligence Units, supported by a coordinated programme of regulatory delivery, the rollout of direct supervision, the operationalisation of the FIU framework, the development of indirect oversight capabilities, and the build-out of AMLA’s risk frameworks. 

Consultation on RTS on Customer Due Diligence – AMLA is consulting on key mandates for the private sector and harmonised supervision, including a draft Regulatory Technical Standards on Customer Due Diligence. The RTS builds on the AML regulation framework, setting out how obliged entities verify customer identity and conducting ongoing monitoring in a risk sensitive and proportionate manner.  Launched on 9 February, the consultation is open until 8 May 2026. For private fund managers, the RTS is likely to have direct implications for LP onboarding standards and the frequency and triggers for ongoing monitoring — particularly where AMLA’s standards sit alongside existing national CDD frameworks. 

Public Consultation on Risk Assessment – On 16 April 2026 AMLA launched two public consultations on risk assessment. The consultations seek to gather industry feedback on draft instruments establishing how obliged entities identify, assess and manage money laundering and terrorist financing risks at both a business-wide and group-wide level. The closing date for submissions is 15 July 2026.  

Luxembourg 

CSSF Investment Fund Sector Supervision Priorities – on 31 March 2026, The Commission de Surveillance du Secteur Financier shared its 2026 supervisory priorities for investment funds and investment fund managers, taking into account broader economic and geopolitical considerations. Key areas of focus include: 

• Governance & operational risk: Strengthening internal controls, risk management, and oversight of third-party providers  

• ICT & cyber risk: Monitoring implementation of Digital Operational Resilience Act and managing cyber threats  

• Liquidity & credit risk: Reviewing liquidity management in open-ended and semi-liquid funds, alongside credit exposures  

• Contagion risks: Ongoing monitoring of systemic and contagion risks  

• Asset valuation risk: Continued scrutiny of asset valuation, particularly for illiquid assets  

• Sustainable finance: Ensuring proper integration of sustainability risks and disclosures  

• Costs and fees:  Continued thematic reviews to identify undue or misaligned costs and fees being charged to investors. 

• ML/TF/PF risks: Maintaining strong on anti-money laundering, terrorist financing, and proliferation financing controls through a continued focus on risk-based supervision. 

United Kingdom 

Synthetic Data and AML – The Financial Conduct Authority, together with the Alan Turing Institute, Plenitude Consulting and Napier AI, has released a research note on a joint project focused on generating a synthetic dataset to support innovation in AML. 

Progress in combatting money laundering requires access to detailed financial data, yet in practice real financial data is difficult to share due to privacy and legal constraints. The project will therefor create an artificial dataset based on UK retail banking activity, enriched with realistic money laundering scenarios. The aim is to enable firms and regulators to collaborate more effectively and test new technologies, including AI, without exposing sensitive information. 

Guernsey 

Policy Statement on Artificial Intelligence Use in Financial Services – On 29 January, The Guernsey Financial Services Commission issued a policy statement supporting the adoption of AI across financial services, including machine learning, large language models, and generative AI.  Firms may implement AI under existing laws and governance frameworks without prior approval. Existing AI standards (e.g., NIST AI Risk Management, ISO/IEC 42001) are encouraged, and the Commission is open to pilot trials, sandbox schemes, or rule variations to facilitate innovation. 

Presentation Conflicts of Interest Thematic Review – On 18 March, The GFSC presented findings from its thematic review of conflicts of interest in the investment and fiduciary sectors.  Whilst this is a broader regulatory governance point rather than an AML-specific issue, it carries clear relevance for compliance functions within private markets firms. The review found that firms are generally effective in identifying, recording and managing conflicts through policies, procedures and training, while also highlighting examples of good practice and areas for further improvement. The key message is that conflicts are inevitable in complex operating models, but firms must go beyond identification and ensure they are actively managed and mitigated to deliver fair client outcomes. 

Jersey 

Sector-based aggregated data –The JFSC published sector-based reports for the period 2020–2024 on 29 January 2026, covering trends in inherent risk factors, including customers from higher-risk jurisdictions and PEP connections. The funds sector report finds that exposure to investors and beneficial owners reported as resident in higher-risk jurisdictions is declining, with very low exposure to terrorist financing jurisdictions. 

For PEPs, the number of reported connections has shown a slight increase; however, the data demonstrates that these are concentrated within specific funds, with over half of funds reporting no connections at all. This underlines the importance of applying proportionate, risk-based compliance frameworks, aligning the level of scrutiny with the fund’s overall investor profile. 

Q4 Registry Supervision inspection programme feedback – On 24 February 2026 the JFSC shared feedback and guidance as part of its registry supervision programme. The report highlighted common issues affecting the accuracy of Jersey’s central register, including outdated or incorrect statutory information, missed filings (particularly changes to directors or significant persons), errors in recording joint ownership, and incomplete details on controllers. It encourages firms to strengthen processes by submitting timely updates (within 21 days), ensuring registers are accurate and available, and using tools like myRegistry to maintain consistency and reduce duplication. 

Sanctions legislation update – On 11 March 2026, the Government of Jersey adopted the Sanctions and Asset-Freezing Law (Jersey) Amendment Regulations 2026, which came into force on 18 March. The Amendment Regulations: 

• Clarify that sanctions prohibitions extend to entities owned or controlled by designated persons, not just the individuals themselves  

• Enable broader information sharing to support international sanctions compliance, subject to Ministerial approval  

• Strengthen and align the reporting obligations of Relevant Financial Institutions with UK standards  

Notably, reporting obligations are expanded so that RFIs must report suspected designated persons or sanctions breaches based on information obtained in the course of business, even without any direct relationship or interaction with a designated person. RFIs that know, or have reasonable cause to suspect, that a person is a designated person or has committed, is committing, or intends to commit an offence under SAFL must report this to the Minister as soon as practicable, providing sufficient detail to support compliance, including the nature and quantity of any funds or economic resources involved. 

Update to Handbook on Complex Structures and Criminal Background Checks – On 26 March 2026 the JFSC updated its AML/CFT/CPF Handbook, refining guidance on complex structures and enhanced criminal background checks. The changes, informed by industry feedback, aim to make the guidance more practical and easier to apply. On complex structures, the Commission has kept simple baseline indicators with clarification they are not prescriptive, aligned wording with Jersey structures, clarified that complexity alone does not automatically trigger higher risk classification or enhanced due diligence, and removed from the EDD section, measures considered standard CDD. 

On criminal background checks, updated guidance and FAQs have been published to improve clarity, alongside revised handbook sections providing additional practical context. The updated handbook comes into effect on 31 May 2026. 

International 

Financial Action Task Force Grey List – On 13 February 2026, the Financial Action Task Force (FATF) reviewed its list of jurisdictions under increased monitoring, commonly known as the “grey list.” Following the review, Kuwait and Papua New Guinea have been added. Kuwait’s listing follows its 2024 mutual evaluation, with FATF identifying weaknesses in effective implementation of an otherwise largely developed legal framework. Papua New Guinea was previously on the grey list from 2014 to 2016 and has been re-added due to structural weaknesses in AML supervision, financial intelligence utilisation, and beneficial ownership transparency. No jurisdictions were removed in this cycle.