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On February 13, 2024, the U.S. Department of the Treasury Financial Crimes Enforcement Network (FinCEN) issued a rulemaking regarding new proposed rules that would require anti-money laundering and combating the financing of terrorism (AML/CFT) for certain investment advisers. A draft notification has been issued. Actions under the Bank Secrecy Act (BSA).
The proposed rule would amend the definition of “financial institution” under the Bank Secrecy Act to include “investment advisor” and would require SEC registered investment advisors (RIAs) and exempt reporting advisors (ERAs) to:
- Implement AML/CFT programs.
- Submit certain reports to FinCEN, such as suspicious activity reports.
- Records related to fund transfers are kept.
- Fulfill other obligations applicable to financial institutions subject to BSA and FinCEN implementing regulations.and
- Apply information sharing provisions between FinCEN, law enforcement government agencies, and certain financial institutions.
At this time, FinCEN is not proposing customer identification program requirements for investment advisers, nor is it proposing a requirement for investment advisers to collect beneficial ownership information for their corporate clients. Both of these issues are expected to be resolved in future rulemaking.
The proposed rule would require RIAs and ERAs to comply with the rule within 12 months of the rule’s final effective date. Under the proposed rule, FinCEN delegated compliance inspection authority to the SEC.
FinCEN has proposed AML regulations for investment advisers several times since 2002, but none of the proposed rules have gone into effect. The current proposed rules were developed in conjunction with a risk assessment conducted by the U.S. Department of the Treasury for the investment advisory industry.
The comment period for the proposed rule is open until April 15, 2024.
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