Regulation Name: FinCEN Extension Of AML/CFT Laws
Publishing Date: 15 February 2024
Region:  United States of America
Agency: FinCEN

In a bid to strengthen the nation’s defenses against financial crimes, the Financial Crimes Enforcement Network (FinCEN) unveiled a transformative proposal on February 15, 2024. This proposal, if enacted, would extend Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws to investment advisers, a sector historically exempt from such regulations.

Historically, while banks, broker-dealers, and mutual funds have been subject to stringent AML/CFT regulations, investment advisers have operated under comparatively lax oversight, despite managing substantial sums of money. However, FinCEN’s proposal acknowledges the significant risk posed by these advisers in enabling illicit financial activities and seeks to address regulatory gaps that have allowed sanctioned individuals, drug traffickers, corrupt officials, and foreign adversaries to exploit weaknesses in compliance programs.

The proposed regulations outline a series of obligations for investment advisers, including the adoption of comprehensive AML/CFT programs, the filing of Suspicious Activity Reports (SARs), maintenance of transaction records, and compliance with information-sharing provisions. These measures aim to enhance transparency, mitigate risks, and safeguard the integrity of the financial system.

However, challenges loom regarding the treatment of non-US investment advisers. While FinCEN mandates compliance for those with US connections, concerns arise about potential conflicts with foreign laws and enforcement responsibilities for advisers lacking US operations.

As stakeholders await the finalization of these regulations, careful consideration of feedback and potential adjustments will be crucial in ensuring effective implementation and compliance. FinCEN’s proposal represents a pivotal step towards closing regulatory gaps and fortifying the nation’s defenses against financial crimes, signaling a new era of accountability and oversight in investment advising.

Read the full proposal here.