Anti Money Laundering Risk in Private Credit: Governance Gaps in a Rapidly Expanding Market

Abstract

Anti–money laundering (AML) risk is structurally amplified in cross-border third-party relationships, particularly within the rapidly expanding private credit sector. Industry estimates place the global private credit market at approximately $3 trillion in assets under management as of early 2025, up from roughly $2 trillion in 2020, and project growth to about $5 trillion by 2029, reflecting continued investor demand and displacement of traditional bank lending. As private credit funds scale globally through complex intermediary networks, the rapid growth, structural opacity, cross-border complexity, and reliance on counterparty diligence conducted by intermediaries, create multilayered transactional and ownership frameworks that heighten money laundering vulnerability and strain traditional AML controls. Despite regulatory expectations under the Bank Secrecy Act (BSA), Financial Action Task Force (FATF) recommendations, and Department of Justice guidance, many institutions continue to treat counterparty and third-party due diligence as a static onboarding exercise rather than a dynamic governance function. Prevailing risk-based models often underestimate jurisdictional asymmetry, beneficial ownership opacity, and systemic interconnectedness within private credit markets. The abstract proposes a tiered AML oversight framework integrating jurisdictional, transactional, and relationship-based risk scoring with continuous monitoring, escalation protocols, and governance accountability. Reframing counterparty and third-party AML risk as an adaptive, enterprise-level control is essential to mitigating legal, financial, and systemic exposure in an increasingly opaque global credit environment.