On Aug. 25, 2015, the Financial Crimes Enforcement Network (“FinCEN”) issued for public comment a proposed rule (the “Proposed Rule”) requiring investment advisers registered with the SEC (“RIAs”) to establish anti-money laundering (“AML”) programs and report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (“BSA”).
The long-anticipated Proposed Rule arrives nearly seven years after FinCEN withdrew earlier proposed AML rules, published in 2002 and 2003, directed at investment advisers, unregistered investment companies and commodity trading advisors. In issuing the current Proposed Rule, FinCEN noted that there have since been significant changes in the relevant regulatory framework for investment advisers, in particular the requirement, as part of the Dodd-Frank Act of 2010, that advisers to private investment funds, including hedge funds and private equity funds, register with the SEC. According to FinCEN, there were 11,235 RIAs as of June 2014, managing a reported $61.9 trillion in assets. As long as these investment advisers are not subject to AML program and suspicious activity reporting requirements, FinCEN stated, “money launderers may see them as a low-risk way to enter the U.S. financial system.”
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