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Rules & Regulations

AML for RIA’s – A View From the (Other) Bridge

March 29, 2017

[Photo:  by M.V. Jantzen / Flickr]


No sooner did we conclude that SEC-registered investment advisors (RIAs) will likely get a pass from having to implement a money laundering program, than we are advised to the contrary by, of all people, Nick Morgan and Art Zwickel of Paul Hastings, from whom we quoted in the earlier article. [Click on:  What’s Happening with the Proposed AML Requirements for RIA’s]. 


Go figure. But all seriousness aside, Financialish appreciates the opportunity to consider opposing viewpoints.


AML experts now believe that the Treasury Department’s Financial Crimes Enforcement Network, or FinCEN, is moving ahead with its long awaited proposed money laundering rule, which has languished in Washington since August 2015, and is likely to become the law. Even in the current deregulatory environment of the Republican White House and Congress.


HOW’S THAT POSSIBLE?   Without trying to ferret out the reasons for the rule’s nearly 2-year delay, the current regulatory does not necessarily pertain to matters involving emergency situations and national security. Which would mean that any rules that deal with money laundering and anti-terrorist financing would be exempt from the rule freeze or deregulation.


This position is confirmed by Stephanie Brooker with Gibson Dunn, who previously served was Enforcement Director with FinCen. Ms. Brooker said: “I think the view of most people in the bank secrecy-AML community is that this area of the law is perhaps less likely to be subject to deregulation in the new administration, given that it does focus on money laundering and anti-terrorist financing.” And she added: “We continue to advise clients at my firm that having a good overall know-your-customer AML program ... is a good idea.”


Eric Kringel, the Bank Secrecy Act specialist at the SEC Enforcement, agrees that the rule is likely to materialize, in part because of the Trump administration’s emphasis on combating terrorism, but also because it appears to be nearing the end of a long development process.


Under FinCEN’s proposed rule, the SEC would assume responsibility for examining advisers’ AML programs, which I no small assignment, given the agency’s already tight schedule, reduced budget, and Commissioner vacancies. That said, the true burden of responsibility would fall on investment advisers registered with the SEC. Banks, broker-dealers, mutual funds and insurance companies already are subject to the rules.