TLDR:
- FinCEN has proposed expanding AML/CFT obligations to cover registered investment advisers, venture capital advisers, and private fund advisers.
- The proposed rules would require covered advisers to establish AML/CFT programs, file reports, and maintain records.
FinCEN has proposed a significant expansion of the Bank Secrecy Act’s anti-money laundering (AML) and countering the financing of terrorism (CFT) obligations. The proposal aims to extend these obligations to federally registered investment advisers and exempt reporting advisers, such as advisers to venture capital funds and private funds.
Historically, investment advisers have not been covered by the BSA’s definition of financial institutions, so they have not been subject to AML/CFT measures. However, FinCEN’s notice of proposed rulemaking (NPRM) would change that by extending the BSA’s applicability to certain investment advisers, including registered investment advisers and exempt reporting advisers.
Under the proposed rule, covered advisers would need to establish and maintain a written AML/CFT program, conduct independent testing, designate a compliance officer, provide ongoing training, file reports on suspicious activities, and maintain certain records related to compliance.
The NPRM’s comment period closes on April 15, 2024, and if adopted, covered investment advisers would need to comply within 12 months. Failure to comply with the BSA’s AML/CFT requirements could result in civil and criminal liabilities, operational restrictions, and reputational harm.
