On August 25, 2015, the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the Department of Treasury (“Treasury”), proposed a rule that would “prescribe minimum standards for anti-money laundering programs (“AML”) to be established by investment advisers.” This rule would be applicable to investment advisers registered with or required to be registered with the Securities and Exchange Commission (“SEC”), with certain exceptions.
In the press release, FinCEN Director Jennifer Shasky stated “Investment advisers are on the front lines of a multi-trillion dollar sector of our financial system,” and further stated that “If a client is trying to move or stash dirty money, we need investment advisers to be vigilant in protecting the integrity of their sector.”
FinCEN delineated in the full rule release that the proposed regulations for investment advisers are comparable to the current anti-money laundering (“AML”) requirements for mutual funds, broker-dealers, banks, and insurance companies. Notably, if adopted then applicable investment advisers would be included in the general definition of “financial institution”, which would require such advisers to, among other things, file Currency Transaction Reports (“CTRs”) and comply with the applicable Bank Secrecy Act recordkeeping requirements, including the maintenance of documentation pertaining to the transmission of funds.
It is imperative that investment advisers have detailed knowledge of how money laundering originates and the implications and risks inherent to their business. The fact that investment advisers are currently not included in the definition of “financial institutions” does not mean advisers may ignore money laundering risks, or that they are not subject to any AML legal requirements. For more information on current AML requirements for investment advisers, read “The Current Landscape of Anti-Money Laundering.”
Core Compliance can assist advisory firms with performing AML risk assessments and creating applicable policies and procedures. For more information on this and other related subjects, please contact us at (619) 278-0020 to schedule a consultation.