Anti-money laundering (AML) regulation – currently applying only to broker-dealers – may soon affect independent advisers under a new proposal being currently drafted by the Financial Crimes Enforcement Network (FinCEN). First set forth as a proposed rule in 2003 and eventually dumped in 2008, FinCEN, a division of the Treasury Department, is working internally to review a new set of rules which, if approved by the Treasury, will ultimately open up the issue for public comment.
Though only in the initial stages, the impact of a final ruling on the independent adviser community would be immense. The introduction of these rules would certainly “reignite an old debate about…requiring financial professionals who do not have custody over their client’s assets to set up a formal AML program and assume the liability” of any averse reports thereafter. However, the rules also would allow firms to reassess and update their overall policies and procedures, including any current AML policies such as OFAC checks, and begin to take steps towards creating more rigorous policies firm-wide. Additionally, the process of launching a new AML policy would also initiate evaluations of “risk exposure,” where a firm would start “looking at factors such as their mix of clients, products and services and the geography of their accounts.” Lastly, inquiries into firm policies are not uncommon during SEC exams, and if an investment advisory firm has a solid policy structure already in place, one will be better prepared to satisfy regulatory requests for demonstrating a strong compliance program.
For more information on how Core Compliance & Legal Services, Inc. (Core Compliance) can help with compliance issues for broker-dealers or independent advisers, visit our Services page, or for assistance on other compliance topics, please contact us at (619) 278-0020 to schedule a consultation.