FinCEN Proposes New AML Regulations for Private Funds and Investment Advisors


The Financial Crimes Enforcement Network (FinCEN) has proposed a new rule regarding anti-money laundering regulations for private funds and investment advisors. The new rule would require certain investment advisors to establish AML programs and report suspicious activity to FinCEN.

The proposed regulations recommend the inclusion of ‘investment advisors’ in the general definition of ‘financial institution’. This would require investment advisors to file Current Transaction Reports and keep records relating to the transfer of funds, just as any other financial institution would.

If enacted, the proposal would apply to investment advisors that are required to be registered with the Securities and Exchange Commission (SEC). This would include advisors to hedge funds, private equity funds as well as other private funds.

While the new AML regulations may seem to create an additional burden for private funds and investment advisors, the ultimate goal of eradicating dirty money is a worthwhile objective. The move should be welcomed, as it brings a level of transparency and stability to this financial sector, even potentially driving more business to this industry.

Sources:

Financial Crimes Enforcement Network

Securities and Exchange Commission

Compliance Building – Proposed Anti-Money Laundering Regulations for Investment Advisers and Fund Managers