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Investment Adviser AML Proposal Withdrawn; Address Change

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  • Baker, John
    The Department of the Treasury s Financial Crimes Enforcement Network has withdrawn its long-standing proposals to require investment advisers, commodity
    Message 1 of 1 , Nov 6, 2008
      The Department of the Treasury's Financial Crimes Enforcement Network has withdrawn its long-standing proposals to require investment advisers, commodity trading advisors, and hedge funds and certain other private investment companies to establish and implement anti-money laundering programs. 73 Fed. Reg. 65567, 65568, 65569 (Oct. 29, 2008). The original proposals were issued in 2002 and 2003, and FinCEN said that, given the passage of time, it has determined that it will not proceed with these AML requirements without publishing new proposals. FinCEN also noted that, in each case, these entities' financial transactions must be conducted through other financial institutions that are subject to AML requirements, and the assets of their clients typically are carried with these financial institutions.

      The FinCEN announcement does not address its implications for broker-dealers who rely on investment advisers to perform elements of the broker-dealer's customer identification program with respect to shared customers. Under 31 CFR � 103.122(b)(6), reliance on another financial institution for this purpose requires that the other financial institution be subject to an AML rule. The Securities and Exchange Commission has issued a series of no-action letters temporarily allowing reliance on investment advisers for this purpose, notwithstanding their lack of an AML requirement. In the original request, the Securities Industry Association asked that, if FinCEN ultimately determined not to issue an AML rule for advisers, broker-dealers be permitted to continue relying on advisers until thirty days after the public announcement of the decision. Securities Industry Association (Feb. 12, 2004). The most recent extension of the no-action relief does not refer to the possibility of the proposed rule's withdrawal, but states that the no-action relief will be automatically withdrawn on the earlier of (1) the date upon which an AML rule for advisers becomes effective or (2) January 12, 2010. Securities Industry and Financial Markets Association (Jan. 10, 2008).

      The FinCEN withdrawals are available on the Federal Register web site, or at


      The SEC no-action letters are online at


      For my original post on the investment adviser AML proposal, see


      For those keeping track of such things, please note that my street address has changed. The new address is shown below:

      John M. Baker <JMB@...>
      Stradley Ronon Stevens & Young, LLP http://www.stradley.com
      1250 Connecticut Avenue, NW, Suite 500
      Washington, DC 20036
      202.822.0140 fax
      FundLaw Listowner http://groups.yahoo.com/group/fundlaw
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