AML Compliance for private funds: Anti-money laundering regulation is entering an operational phase, with global authorities tightening KYC, sanctions screening, and supervisory expectations across private markets. This AML round-up outlines the latest regulatory shifts affecting fund managers, from delayed implementation timelines and consolidated sanctions regimes to expanded supervisory mandates—highlighting why institutional onboarding, continuous monitoring, and integrated compliance infrastructure are now critical to fund operations.
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First AML Round-up for 2026
Welcome to our first AML Round-Up of 2026, covering the key regulatory developments impacting AML compliance for private funds over the past three months. Key developments include:
- FinCEN’s confirmation of a delay to the Investment Adviser AML rule, now effective 1 January 2028, giving firms more time to prepare.
- AMLA assuming full EU AML/CFT supervisory responsibility and publishing its first multi-year strategy, driving supervisory convergence and direct supervision.
- The move to a consolidated UK Sanctions List.
For questions on these or any of the other developments covered in this update, please reach out to Louis Dodd or Askender Ouazzani.
AML Compliance for Private Funds: United States
FinCEN Survey of the Costs of AML/CFT Compliance–
Following an industry survey, which closed in December 2025, FinCEN is assessing feedback to inform future AML rule calibration, particularly regarding compliance burdens on smaller institutions and potential adjustments to reporting thresholds.
FinCEN Confirms Delay to Investment Adviser AML Rule –
On December 31, 2025, FinCEN confirmed a two-year delay to the implementation of its AML/CFT programme and Suspicious Activity Report requirements for Registered Investment Advisers and Exempt Reporting Advisers. The rule, originally due to take effect in 2026, will now become effective on January 1, 2028. Investment advisers must have AML/CFT programmes fully developed and implemented by this revised date, providing firms with additional time to prepare for compliance.
New York LLC Transparency Act Enters into Force –
The New York LLC Transparency Act came into effect on January 1, 2026, introducing new beneficial ownership disclosure requirements aligned with the U.S. Corporate Transparency Act. Non-exempt foreign LLCs authorised to conduct business in New York must file initial and annual reports identifying individuals who own or control the entity. Unlike the federal regime, exempt entities under the New York framework are still required to submit a formal attestation confirming their exemption status.
European Union
AMLA Publishes First Multi-Year Strategy (2026–2028) –
The EU Anti-Money Laundering Authority (AMLA) has published its first Single Programming Document (SPD) for 2026–2028, outlining priorities including completing the EU Single AML Rulebook, driving supervisory convergence, strengthening FIU cooperation, and directly supervising higher-risk institutions.
AMLA Assumes Full AML/CFT Mandate from EBA –
On January 1, 2026, the European Banking Authority (EBA) transferred all AML/CFT responsibilities to the EU Anti-Money Laundering Authority (AMLA), completing the EU’s integrated AML/CFT framework. Existing EBA guidelines and tools, including the EuReCa database, remain in force under AMLA oversight. AMLA will complete the Single Rulebook, advance supervisory convergence, coordinate FIUs, and directly supervise the EU’s 40 most complex financial institutions, while the EBA continues to address money laundering risks through prudential regulation within a coordinated framework.
Consultation on Customer Due Diligence –
AMLA is consulting on draft Regulatory Technical Standards – under the EU Anti-Money Laundering Regulation 2024/1624, setting out detailed guidance on customer due diligence, simplified and enhanced due diligence for all obliged entities. The consultation period is open from 9 February to 8 May 2026, and input is invited from all stakeholders.
Luxembourg
Counter-Proliferation Financing Review –
The CSSF has completed a thematic review of Luxembourg investment fund managers’ exposure to proliferation financing risks, particularly in relation to dual-use goods and shipping or transport investments. The review reflects strengthened FATF standards and Luxembourg regulatory requirements for firms to identify, assess and mitigate risks linked to weapons of mass destruction financing, including compliance with targeted financial sanctions. The CSSF noted increasing industry awareness, with firms enhancing AML/CFT frameworks through improved sanctions screening, staff training and asset-level due diligence. While control frameworks continue to mature, overall proliferation financing risk within the Luxembourg fund sector is currently considered low, with ongoing regulatory focus expected.
2025 Questionnaire on Financial Crime –
The CSSF will launch its annual AML/CFT Financial Crime Questionnaire on 23 February 2026, with submissions required via the CSSF eDesk platform by 3 April 2026. The questionnaire collects standardized data on ML/TF risks and mitigation measures. Completion must be overseen by the RC or RR, though preparation can be delegated. An additional ad hoc questionnaire will support AMLA preparations for direct supervision from January 2028.
Updated TCSP Sub-Sector Risk Assessment –
The CSSF has published an updated Money Laundering and Terrorist Financing (ML/FT) Sub-Sector Risk Assessment for Trust and Company Service Providers terrorist financing, proliferation risks, emerging threats, and industry summaries. Firms must incorporate findings and recommendations into their AML/CFT frameworks.
CSSF Circular 25/901 and Terminology Guidance –
To further advance AML compliance for private funds, the CSSF has issued Circular 25/901, updating the regulatory framework for specialised investment funds, investment companies in risk capital, and Part II UCIs.
The circular consolidates several existing circulars into a single, thematically structured document. It maintains core principles while aligning requirements with current market practices and European regulatory standards.
It introduces a more flexible, principles-based approach. This includes revised investment and borrowing limits, clarification on indirect investments, and additional expectations for fund sales documentation. Existing rules for funds authorised prior to the circular remain unchanged.
In parallel, the CSSF has published a Compilation of Key Concepts and Terms relating to alternative investment funds (excluding UCITS and MMFs). The document explains commonly used concepts, including investment policies, strategies, asset classes, investment methods, and subscription and redemption models, to support industry understanding and regulatory engagement.
LBR Reform –
On 28 January 2026, Minister of Justice Elisabeth Margue and Luxembourg Business Registers presented the implementation plan for the LBR reform, aimed at improving the quality, reliability and usability of RCS and RBE data. The initiative enhances transparency, legal certainty and the fight against economic crime, consolidating LBR as the central authority of reference for Luxembourg-registered entities.
United Kingdom
UK Sanctions List Consolidation –
The UK government has moved to a single list for UK sanctions designations. Effective 28 January 2026, the UK Sanctions List replaces the legacy Consolidated List. Firms must ensure screening processes are fully aligned to comply with AML compliance for private funds.
OFSI to Clamp Down on Crypto Asset Abuse –
The Office of Financial Sanctions Implementation (OFSI), in coordination with the FCA, is targeting crypto asset misuse and related money laundering. Using crypto to evade sanctions is treated equivalently to exploiting traditional currencies.
The FCA has published the first edition of its new newsletter, Enforcement Watch, covering its updated publicity policy, enforcement case priorities, and international partnerships. Enforcement priorities include investigating concerns around the adequacy of firms’ financial crime controls and taking action where firms are suspected of falling short of required standards.
Guernsey
Policy Statement on Artificial Intelligence Use in Financial Services –
The Guernsey Financial Services Committee has 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.
Thematic Review: Correspondent and Intermediary Relationships –
In December 2025, the Commission published a thematic review of investment firms’ correspondent and intermediary relationships under the AML/CFT/CPF Handbook. Most firms demonstrated good controls, but six key improvement areas were identified. Further sector outreach will occur in 2026.
Jersey
Thematic Examination Program 2026 –
The Jersey Financial Services Commission has published its 2026 Thematic Examination Program. Selected themes for the year include exemptions from customer due diligence requirements and customer complaints. Firms selected for an examination will be contacted directly by their supervisor.
Amendments to AMLSP Legal Arrangement Form –
The Commission has amended its AMLSP Legal Arrangement form to enable a limited partnership and its general partner to register using a single application, eliminating the need for separate submissions. Registrants will now receive a consolidated registration certificate. The updated form is available on myJFSC.
2025 Conflicts of Interest Thematic Examination –
The Commission has issued feedback following the 2025 thematic examination of conflicts of interest among registered persons. The review assessed policies, record-keeping, compliance oversight, staff training, and independence of key persons. Feedback highlighted gaps in:
- Identification and management of conflicts: instances of undisclosed conflicts, incomplete registers, and insufficient staff training.
- Internal systems and controls: gaps in policies and inconsistent application.
- Independence of key persons: compliance functions sometimes undermined where roles overlapped with business activities.
The Commission stressed that inadequate conflict management increases the risk of regulatory breaches, reputational damage, and compromised customer outcomes.
Enhancements to Criminal Background Checks –
In November, the Commission issued feedback on enhancements to criminal background checks for Principal Persons and Key Persons. Following consultation earlier in 2025, the revised approach reflects stakeholder input while maintaining a proportionate and effective regime. Key changes include the removal of the three-year rolling refresh requirement and placing responsibility on Supervised Persons to collect and maintain records of checks performed. Implementation is deferred to 31 May 2026 to give industry more time to prepare.
Follow-On Consultation: AML/CFT/CPF Handbook – Complex Structures –
Guidance and codes for complex structures were rewritten following industry feedback. Responses are requested by 12 February 2026.
Cayman Islands
Prudential Information Survey – Registered Persons –
The Cayman Islands Monetary Authority has launched the Prudential Information Survey (ADR-046-75-02) for 2025, covering 1 January–31 December 2025. Registered Persons must submit via REEFS between 1 January and 31 March 2026. The survey supports CIMA’s supervisory programme by collecting data on sector activities, exposures, and risks. This does not replace the Annual Declaration (ADR-046-75). Timely and accurate submissions are required to be aligned with AML compliance for private funds.
Frozen Assets Reporting –
The Cayman Islands Financial Reporting Authority (FRA) issued a financial sanctions reporting notice requiring entities holding or controlling funds or economic resources belonging to designated persons to submit an annual frozen assets report. The requirement stems from amendments to UK sanctions legislation extended to the Cayman Islands, strengthening transparency and oversight of sanctioned assets. Reports must include details and USD values of all relevant frozen assets held in the Cayman Islands or overseas under the applicable sanctions’ regime, based on positions as of 30 September 2025, and were required to be submitted to the FRA by 30 November 2025. Firms must also maintain ongoing obligations to identify sanctioned persons, freeze relevant assets, and report newly frozen assets immediately, to comply with AML compliance for private funds.
International
Canada – Updated FINTRAC Guidance: PEPs and Heads of International Organisations –
The 2025 Assessment of Money Laundering and Terrorist Financing Risks in Canada highlights that politically exposed persons (PEPs) and heads of international organizations—as well as their family members and close associates—can be at higher risk for money laundering and terrorist financing, either as targets or perpetrators. To advance AML compliance for private funds, and to help reporting entities identify suspicious activity, FINTRAC has published indicators related to bribery and corruption, available in the sectoral suspicious transaction’s guidance.
Switzerland –
FINMA’s 2025 Risk Monitor highlights key risks for the Swiss financial centre:
- Financial: real estate and mortgage vulnerabilities, credit and liquidity risks
- Non-financial: cyberattacks, ICT complexity, money laundering, sanctions, outsourcing
- Geopolitical pressures remain high, with rising debt and trade tensions
- Climate risk included for the first time, with institutions integrating transition and physical risks into risk management
FINMA stresses the need for AML compliance for private funds, through strong risk culture, governance, and forward-looking supervision to ensure resilience and stability.
Financial Action Task Force Plenary –
The FATF will hold its fifth Plenary under the Mexican Presidency in Mexico City from 11–13 February 2026. Representatives from more than 200 jurisdictions will meet to discuss key developments in tackling money laundering, terrorist financing and proliferation financing, to ensure adherence to AML compliance for private funds. Discussions will include mutual evaluation reports for Austria, Italy and Singapore, progress on addressing emerging financial crime threats, a refresh of the “grey list” and the use of technology to combat illicit finance.
Looking Ahead
AML/CFT/CPF regulation, and AML compliance for private funds, continues to evolve, shifting from static “checkbox” compliance to intelligence-driven, ongoing monitoring. With a streamlined approach to investor KYC, daily sanctions screening and MLRO support, Sonata One is well placed to help fund managers navigate this changing landscape. Talk to us to find out how we can support your compliance in a world of evolving risks and regulatory expectations.
For more information, or to speak to our expert team about regulation and compliance, get in touch with us here, or send an email to marketing@sonataone.com.
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