FinCEN Issues Notice of Proposed Rulemaking on AML

On February 13, FinCEN issued a long-awaited notice of proposed rulemaking (Proposal) relating to anti-money laundering programs for investment advisers, which would require certain investment advisers to apply AML and Countering the Financing of Terrorism (AML/CFT) requirements pursuant to the Bank Secrecy Act (BSA), including implementing risk-based AML/CFT programs, reporting suspicious activity to FinCEN, and fulfilling recordkeeping requirements. In addition, the Proposal would require the adoption of a written AML program by a board or equivalent with a designated AML officer, ongoing training, and independent testing.  The Proposal would also require advisers to file SARs and currency transaction reports, as well as related recordkeeping.

While the Proposal does not apply to advisory activities with respect to open-end mutual funds that have their own AML program, other types of products of fund advisers would be in scope, including registered closed-end funds, private funds and non-discretionary advisory activity. The Proposal also covers sub-advisory activity, even if the adviser with oversight is subject to an AML program requirement.  In cases where a covered adviser has an affiliate that is subject to an AML program requirement, FinCEN noted that it is not mandating that these institutions establish a single, enterprise-wide AML program but it does expect institutions to identify and mitigate risks across the organization. Advisers are permitted to delegate the performance of required AML functions, including to affiliates that elect to adopt an enterprise-wide AML program, but each covered adviser remains responsible for the effectiveness of its own AML program.

Click here to view the notice of proposed rulemaking.