The Financial Crimes Enforcement Network (FinCEN) and the Securities and Exchange Commission (SEC) have proposed a new rule aimed at enhancing anti-money laundering (AML) compliance for registered investment advisers (RIAs) and exempt reporting advisers (ERAs).
The proposal requires these advisers to establish and maintain written customer identification programs (CIPs) to prevent illicit finance activities. This rule is part of a broader effort to close regulatory gaps and strengthen the U.S. financial system’s defenses against money laundering and terrorist financing.
Key aspects of the proposed rule include:
- Customer Identification Programs (CIPs): Investment advisers must verify the identity of any person seeking to open an account, maintain records of the verification process, and consult lists of known or suspected terrorists. This aims to form a reasonable belief about the true identities of their customers.
- AML/CFT Program Requirements: The rule mandates the implementation of risk-based AML/CFT programs, requiring advisers to report suspicious activities, fulfill recordkeeping requirements, and comply with other Bank Secrecy Act (BSA) obligations.
- Regulatory Harmonization: The proposal aligns AML requirements for investment advisers with those already applicable to broker-dealers, addressing risks identified in the Treasury’s risk assessment report.
The proposed rule also permits investment advisers to delegate AML program responsibilities to other financial institutions or third-party service providers, provided they remain accountable for compliance. This initiative follows a February 2024 proposal to include investment advisers in the definition of “financial institutions” under the BSA, further integrating them into the existing AML regulatory framework.
The public is invited to comment on the proposal until July 13, 2024. If adopted, investment advisers will have 12 months to implement the new requirements.
Sources: SEC, FinCEN, White & Case, DLA Piper (SEC.gov) (Home | White & Case LLP) (Global Law Firm | DLA Piper) (FinCEN) (Davis Polk)(fintech.global)
