Shiv Telegram Media: Treasury Proposes Rule to Extend Anti-Money Laundering Regulations to Investment Advisers
2 min read
Title: US Treasury Proposes New Regulations to Target Money Laundering Activities in Investment Advisers
In a bid to crack down on illicit finance and money laundering, the US Treasury Department’s anti-corruption watchdog, the Financial Crimes Enforcement Network (FinCEN), has put forth new regulations that would extend the existing anti-money laundering (AML) rules to investment advisers. This move comes after years of exemption for investment advisers, allowing for potential exploitation by criminals seeking ways to hide their funds.
Under the proposed rules, investment advisers registered with or reporting to the Securities Exchange Commission would be required to submit Suspicious Activity Reports (SARs) to FinCEN. This would enable the government agency to better monitor potential fraudulent activities and facilitate investigation processes. Furthermore, covered investment advisers would also have to disclose additional information about their clients under specific circumstances.
While these regulations aim to tighten oversight, they do not mandate investment advisers to establish formal customer identification programs like banks. Similarly, the proposal does not demand reporting of beneficial ownership information for clients who are legal entities. However, FinCEN has expressed its intention to pursue these exemptions in the near future, according to a fact sheet released alongside the AML proposal.
The absence of AML regulations within the investment adviser sector has previously allowed illicit actors to seek advisers who refrain from questioning the source of their clients’ wealth. Exploiting this gap, money launderers, tax evaders, and criminals have been using US investment advisers as a means to invest in US securities, real estate, and other assets, as highlighted by FinCEN.
This notable push to regulate investment advisers stems from the increasing misuse of these professionals for illicit finance. Nation-state actors like Russia and China, as well as wealthy individuals attempting to move and conceal their funds, have reportedly taken advantage of the leniency within the sector. The proposed rules aim to prevent such abuses and safeguard the integrity of the financial system.
It is worth noting that previous attempts by FinCEN to include investment advisers under the Bank Secrecy Act provisions in 2003 and 2015 did not reach a conclusive outcome. This underscores the significance of the current proposal and the urgency to address the escalating threat of money laundering through investment advisers.
If approved, these regulations would mark a substantial step towards combatting financial crimes in the investment adviser sector. By imposing stricter reporting requirements and transparency measures, the US government aims to deter money laundering activities and effectively monitor the flow of funds in this domain.
As the proposed regulations move through the necessary approval processes, the introduction of these measures would bring the US in line with international efforts to combat money laundering and enhance financial security.
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