US rule to give investment advisers anti-money laundering duty
US fund managers and other investment advisers would have to take steps to combat money laundering and report suspicious transactions to authorities under a long-awaited US Treasury rule proposed on Tuesday, reports Reuters.
If made final the proposal by Treasury’s Financial Crimes Enforcement Network (FinCEN) would close a long-standing hole in the US anti-money laundering net and lessen the burden on broker-dealers and other institutions long required to actively combat financial crime, industry sources said.
The move comes amid a US and international crackdown against money laundering and sanctions evasion, which has led to billions of dollars of fines against big banks.
“Investment advisers are on the front lines of a multi-trillion dollar sector of our financial system,” said FinCEN Director Jennifer Shasky Calvery. “If a client is trying to move or stash dirty money, we need investment advisers to be vigilant in protecting the integrity of their sector.”
The rule would apply to investment advisers that must register with the US Securities and Exchange Commission. There are more than 11,000 of them with US$62 trillion in assets, according to 2014 figures.
Registered advisers provide services such as portfolio management and pension consulting to hedge funds, private equity funds and other private funds, as well as corporations, individuals and institutions.
The SEC would have authority to conduct compliance examinations.
“For 13 years it was a big hole in the regulatory structure and many people are really glad they’re finally going to close it,” said Alma Angotti, a former official with FinCEN who now is a managing director at consulting firm Navigant.
Angotti, who after the passage of the Patriot Act in 2001 helped draft an anti-money laundering rule for advisers that was never enacted, said a long-standing challenge for broker-dealers has been knowing whether it was wise to rely on investment advisers who send them business to verify customers’ true identities.
“The industry will now know exactly what they have to do,” Angotti said.
FinCEN’s proposal would also designate investment advisers as “financial institutions” subject to the main US anti-money laundering law, the Bank Secrecy Act. They would have to file so-called Currency Transaction Reports on large cash transactions and keep records relating to the transmittal of funds.
