We’ve been here before. FinCEN proposed anti-money laundering rules for investment advisers in 2003 and 2015. The pushback has been the Custody Rule, which requires a third-party to hold the client assets. That third-party will be doing the AML-KYC review. Those that are doing self-custody fall under existing AML rules.
Since 2015, there has been expansion in the weaponization of the dollar against persons and countries that the United States has issues with. The current hot button being Russian wealth. So, I think the rule is going to end up being promulgated this time.
It’s a lighter version of the rule that would require registered investment advisers and exempt reporting advisers to:
- implement an AML/CFT program;
- file certain reports, such as Suspicious Activity Reports, with FinCEN;
- keep records such as those relating to the transmittal of funds (i.e., comply with the Recordkeeping and Travel Rule); and
- fulfill other obligations applicable to financial institutions subject to the BSA and FinCEN’s implementing regulations.
It would not require customer identification program requirements. At this time. That requirement is specifically called out for a future joint rulemaking with the SEC.
The rule also proposes to delegate examination authority to the SEC.
The proposal has a 60-day comment period and a 12-month compliance deadline. No need to act currently. I think we’ll need to pencil it in for workplans in the second half of 2024.
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