AML Programs to be Required for Federal Investment Advisers

The Financial Crimes Enforcement Network (FinCEN) has finally reproposed a rule requiring investment advisers that are required to be registered with the U.S. Securities and Exchange Commission (SEC) to establish an anti-money laundering (AML) program and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (BSA).  As a part of the proposed rule, FinCEN has also proposed to include investment advisers in the general definition of “financial institution,” which would require them to file Currency Transaction Reports (CTRs) and keep records relating to the transmittal of funds.

The proposed rule would address money laundering vulnerabilities in the U.S. financial system and put investment advisers on the same regulatory playing field as broker-dealers , mutual funds, banks, and insurance companies by requiring investment advisers to establish AML programs and file reports of suspicious activity would bring them under similar regulations as other financial institutions subject to the BSA.  The obligations are extensive, and would even require the AML programs for sub-advisers to address the sub-accounts managed on behalf of other advisers.

Under the proposed rule, the SEC would be granted authority to examine investment advisers for compliance with the respective rules by FinCEN.

The comment period will be 60 days, and will commence upon publication in the Federal Register.