What’s Happening?
On 13 February 2024, the Financial Crimes Enforcement Network (FinCEN) put forward a proposal to expand the anti-money laundering and counter-terrorist financing (AML/CFT) rules under the US Bank Secrecy Act (BSA) to US investment advisers. This change aims to bring investment advisers, including hedge funds, private fund advisers, and venture capital fund advisers, under the scope of the BSA rules.
What This Means for Covered Investment Advisers:
If the proposed rule is adopted, if you are an SEC Registered Investment Adviser (RIA) or Exempt Reporting Adviser (ERA):
- Implementing a Custom AML/CFT Program: You’ll need to set up an AML/CTF program that is tailored to address your firm’s ML/TF risks, including setting appropriate policies, naming a compliance officer, and providing regular AML/CTF training for employees.
- Reporting Suspicious Activities: It will be mandatory to report any suspicious transactions to FinCEN.
- Engaging in Information Sharing: You will be required to participate in information sharing with FinCEN and other institutions to prevent illegal financial activities.
- Adhering to Recordkeeping Requirements: You will have to keep detailed records, especially those related to fund transfers, to comply with the BSA rules.
Interestingly for now, FinCEN’s proposed rule does not require investment advisers to establish a customer identification program or collect information on the beneficial owners of legal entity customers. FinCEN expects to address these areas in a joint rulemaking with the SEC in the future.
Why It Matters:
FinCEN has highlighted a gap in the current regulatory framework, where the absence of direct AML/CFT regulations for RIAs and ERA may leave room for the misuse of these advisers for illicit finance. Including RIAs and ERAs under the BSA is expected to close this gap and enhance the integrity of the US financial system.
How We Can Help:
At The Ascent Group, we are closely monitoring important regulatory developments around the world to understand how they might affect you and your operations. This proposed change underscores the need for adaptable and forward-looking compliance strategies. Our team is ready to assist you in integrating these new requirements into your practice, ensuring you remain compliant and well-positioned for future success.
Questions or Need Support?
If you are wondering how this might affect your firm or need help preparing for these changes, please do not hesitate to reach out. Our experts are here to guide you through these updates and help you turn compliance into an opportunity.
