Moody's claims that this increase has resulted in a proportionate increase in SEC monitoring, with a focus on broker-dealers and investment advisors for their control of third-party providers and anti-money laundering (AML) procedures.

By launching 784 enforcement actions in fiscal year 2023—a 3% increase from the year before—and collecting over $5 billion in fines and reimbursements, the SEC set a new record. A noteworthy 501 of these were stand-alone cases addressing insider trading, private funds, and wrongdoing by financial advisers and broker-dealers, indicating an increasing regulatory focus.

In reaction to this heightened regulation, asset managers are currently facing pressure to strengthen their risk management systems. Third-party risk management, supervision of private fund advisers, and AML compliance are crucial areas of concern. The sector continues to experience difficulties with customer identification programs (CIP) and compliance; many are still having difficulty meeting changing regulatory requirements.

Several important actions may be taken by asset managers to strengthen their compliance frameworks:

1. Clarifying Compliance Scope: To differentiate between customers and accounts during regulatory assessments, it is essential to have a thorough awareness of the differences between customer definitions and accounts under CIP laws.
2. Adopting a Risk-Based Approach: This entails adjusting AML procedures to the distinct risk profiles that various goods, services, and clientele groups provide, including taking regional concerns into consideration.
3. Creating Flexible Procedures: Creating a fair and flexible compliance plan is essential to adjusting to changing risk environments and business models.
4. Handling Private Fund Risks: To reduce new risks, procedures for reporting suspicious activity and adhering to AML rules should be in place inside private funds.
5. Customizing Policies and Procedures: In order to successfully reduce risks, asset managers should modify their compliance measures to meet their unique operating requirements, making sure that all procedures are transparent and thoroughly documented.
6. Leveraging Automated Tools and Technologies: RegTech and AI may be used to eliminate human error and streamline operations for tasks like risk assessments, SAR monitoring, and onboarding.
7. Reducing Sanctions and Fraud Risks: It is essential to make sure that activities and investments adhere to sanctions and to put in place strong procedures for fraud prevention and whistleblowers.
8. Encouraging a Culture of Compliance and Continuous Training: To handle complicated regulatory obligations, the firm must establish a compliance-first culture and provide hands-on, scenario-based training.