(Article from Registered Funds Regulatory Update, April 2024)
For more information, please visit the Registered Funds Resource Center.
The U.S. Department of the Treasury’s Financial Crimes Enforcement Network recently proposed a rule that would require SEC registered investment advisers, as well as those that report to the SEC as exempt reporting advisers, to implement AML and countering the financing of terrorism programs.
The proposed rule adds investment advisers to the list of businesses classified as “financial institutions” under the Bank Secrecy Act and would require advisers to also file suspicious activity reports, fulfill certain recordkeeping requirements, and fulfill other obligations applicable to financial institutions subject to the Bank Secrecy Act and FinCEN’s implementing regulations. The proposed rule also applies information-sharing provisions between and among FinCEN, law enforcement government agencies, and certain financial institutions, and delegates examination authority for this rule to the SEC.
The proposed rule is the third time that FinCEN has attempted to impose AML rules on the investment advisor sector and is tailored towards addressing material risks and strengthening financial transparency while minimizing potential business burden as much as possible. Rules previously proposed in 2003 and 2015 were never finalized.
The proposed rule is subject to comment until April 15, 2024. If the proposed rule is adopted, investment advisers would have 12 months to comply.
Financial Crimes Enforcement Network: Anti-Money Laundering/ Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers, RIN 1506–AB58 (Feb. 15, 2024), available at: https://www.govinfo.gov/content/pkg/FR-2024-02-15/pdf/2024-02854.pdf.