08 April 2024
On February 13 2024, the U.S. Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a notice of proposed rulemaking focusing on stricter Anti-Money Laundering/Combating the Financing of Terrorism (“AML/CFT”) requirements for certain previously exempted RIAs. If enacted, the revised rule would bring significant changes to the investment adviser industry
Under the proposal, the following two categories of investment advisers would be added to the Bank Secrecy Act’s definition of “financial institution” and therefore become subject to AML/CFT requirements:
The proposed rule would impact RIAs/ERAs in several key ways:
FinCEN has acknowledged, in several sections of its proposal, that many private funds advisers rely on fund administrators, notably in relation to AML/CFT tasks such as investor due diligence. FinCEN noted that the use of offshore fund administrators for parts of AML/CFT processes, as opposed to US-based ones, may not be appropriate due to the differences in local requirements. FinCEN also specified that ultimate liability for compliance with an adviser’s AML/CFT programme remains with the adviser.
Mutual funds are already captured as “financial institutions” under the BSA. Therefore, investment advisers would not be required to apply the requirements relating to AML/CFT programmes and SAR reporting in relation to those funds.
The comment period runs through April 15 2024, and covered investment advisers would be required to comply with the rule within 12 months from the final rule’s effective date.
Apex’s External Compliance Services – US can assist you in evaluating your obligations under the rule and support firms in the developing of policies, procedures and controls designed to comply with the requirements of the BSA.
