WASHINGTON—The Treasury Department said it is taking steps to address money laundering risks associated with investment advisers.
“Specifically, the agency asserts that absent consistent and comprehensive anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations, corrupt officials and other illicit actors may invest ill-gotten gains in the U.S. financial system through hedge funds and private equity firms,” National Law Review reported. “Treasury indicated its intention to issue a proposal in the first quarter of 2024 that would apply Bank Secrecy Act (BSA) AML/CFT requirements, including suspicious activity report obligations, to certain investment advisers.”
In preparing this proposal, Treasury said it is re-examining and updating its 2015 Proposed Rule, which had a similar aim. The 2015 proposal covered investment advisers who were, or were required to be, registered with the SEC.
The proposal notes that Treasury was considering incorporating other smaller investment advisers, such as state-regulated advisers and other advisers exempted from SEC registration, into subsequent rulemakings. At the time of the proposal, the SEC estimated the rule would cover more than 11,000 investment advisers reporting approximately $61.9 trillion in assets for their clients, National Law Review said.
What Prior Rule Would Have Done
According to the National Law Review, the 2015 proposal would have designated investment advisers as financial institutions under the BSA and required that they develop and implement a written, risk-based program that is reasonably designed to comply with BSA requirements and prevent the investment adviser from being used to facilitate money laundering and terrorism financing.
Minimum requirements for such a program would have included:
- Establishing and implementing policies, procedures, and internal controls
- Providing for independent testing for compliance conducted by adviser personnel or a qualified outside party
- Designating a person or persons responsible for implementing and monitoring the operations and internal controls of the program
- Providing ongoing training for appropriate persons
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