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Mutual Funds Required To File Suspicious Activity Reports

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  • Baker, John
    The Department of the Treasury s Financial Crimes Enforcement Network has adopted a new rule requiring mutual funds to file reports of suspicious transactions
    Message 1 of 1 , May 8, 2006
      The Department of the Treasury's Financial Crimes Enforcement
      Network has adopted a new rule requiring mutual funds to file reports of
      suspicious transactions with FinCEN on Form SAR-SF. 71 Fed. Reg. 26213
      (Apr. 27, 2006). In general, the new rule requires a filing for mutual
      fund transactions that involve funds or other assets of at least $5000,
      when the mutual fund knows or has reason to suspect that the transaction
      involves funds derived from illegal activity, is designed to evade Bank
      Secrecy Act regulations, has no apparent lawful purpose, or involves use
      of the mutual fund to facilitate criminal activity. The new reporting
      requirement applies to transactions occurring after October 31, 2006.

      The new rule is the second anti-money laundering requirement for
      mutual funds to be adopted in recent months. FinCEN in December
      required mutual funds to establish due diligence policies, procedures,
      and controls reasonably designed to detect and report money laundering
      through correspondent accounts maintained for foreign financial
      institutions. 71 Fed. Reg. 496 (Dec. 15, 2005); see also 71 Fed. Reg.
      16040 (Mar. 24, 2006) (extending compliance dates). FinCEN at that time
      also adopted due diligence requirements for private banking accounts; it
      noted that private banking accounts are likely to be offered primarily
      by other types of financial institutions, but said that mutual funds
      would be required to comply with this rule if they offer accounts that
      meet the definition of a private banking account in the future. New
      accounts are required to be in compliance on and after July 5, 2006; for
      existing accounts (established before July 5), compliance is required by
      October 2, 2006.

      The new rule was announced in a May 3 press release, and it is
      available online (with a link to the FinCEN release) at


      The various releases are also available from the Federal
      Register website at


      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1220 19th Street NW, Suite 600
      Washington DC 20036
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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