TLDR:
Key Points:
- The US Treasury Department proposed new regulations to extend Anti-Money Laundering and Combating the Financing of Terrorism laws to investment advisers, including private equity and venture capital funds.
- The proposed regulations would impose new obligations on investment advisers, such as adopting comprehensive AML/CFT programs and filing Suspicious Activity Reports.
Article Summary
The US Treasury Department has announced intentions to extend Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) laws to private equity and venture capital funds through new proposed regulations. Investment advisers, who historically have been exempt from AML and CFT regulations, are now being targeted due to the significant risk they pose in enabling illicit actors to access the US market. The proposed regulations aim to close gaps in the current laws that allow sanctioned individuals, drug traffickers, corrupt foreign officials, and other illicit actors to exploit weaker compliance programs of certain investment advisers.
The proposed regulations would require investment advisers to adopt comprehensive AML/CFT programs, file Suspicious Activity Reports, maintain records of certain transactions, and implement special due diligence requirements. These new compliance regulations would impose a significant regulatory burden on investment advisers but would allow for delegation of certain activities to third-party providers.
Foreign investment advisers, including those from Canada, will also be impacted by the proposed regulations if they are required to register with the SEC. Non-US investment advisers may need to comply with the regulations, although FinCEN is seeking comments to address conflicts with foreign laws, especially regarding the obligation for compliance to be overseen by a person residing in the US.
Canadian private equity and venture capital firms may face long-term impacts as Canadian authorities may impose additional measures to combat money laundering and terrorist financing. Dentons, as a global law firm, can assist with establishing or updating AML/CFT compliance programs to help firms navigate these new regulations.
