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Rules & Regulations

What’s Happening with the Proposed AML Requirements for RIA’s

March 29, 2017

[Photo:  by M.V. Jantzen / Flickr] raises a timely and relevant question that very few people seem to be talking about these days. In this age of regulation rollbacks, will the federal government follow through and adopt a proposed rule that would require investment advisors registered with the SEC (RIAs) to establish anti-money laundering (AML) policies and procedures (WSPs)?


That rule was proposed in August 2015 by FinCEN (the Treasury Department’s Financial Crimes Enforcement Network) in order to subject advisors registered with the SEC to the same requirements that banks, mutual funds, broker-dealers and insurances companies already face – i.e., to maintain AML programs and file reports of suspicious activities (SARs).


According to an 8/29/16 ‘Insights’ publication written by Nicolas Morgan, Arthur Zwickel & Margaret Buckles of Paul Hastings – "FinCEN’s Proposed AML Requirements on Investment Advisers Pose Imminent Burdens and Risks” - the proposed rule would, among other things:  


  • Replace the requirement that investment advisers file Form 8300 reports for the receipt of more than $10,000 in cash and negotiable instruments with a requirement that investment advisers file Currency Transaction Reports (CTRs) in accordance with 31 CFR 1010.311;
  • Subject investment advisers to the requirements of the Recordkeeping and Travel Rules and other related recordkeeping requirements for transmittals of funds exceeding $3,000;
  • Require each investment adviser to develop and implement a written AML program, approved in writing by its board of directors or a party with a similar function, that is reasonably designed to prevent the adviser from being used to facilitate money laundering or the financing of terrorist activities;
  • Require investment advisers to file Suspicious Activity Reports (SARs) for activities involving at least $5,000 in funds or other assets.


While there are few 'sure things in life', it almost certain that this rule will not be enacted in the near future.Here's what we hear: 


  • At the SIFMA 2017 C&L Annual Conference, many attendees complained that the steep cost of monitoring transactions and submitting millions of SARs far outweigh any benefits the government may derive – this is in addition to he millions in penalties that firms have been assessed for violating money laundering rules.
  • For most RIAs, who are relatively small, the cost of implementing and maintaining such AML programs would be prohibitive. 
  • Jay Clayton, the SEC Chair nominee, would join the SEC with a pro-business, anti-regulation point of view.
  • Finally, the Trump administration, along with a sympathetic Congress, would not be anxious to throw significant new regulations at financial services firms.


However, in the end, you never know which way the wind blows. 


[For an opposing viewpoint, click on:  AML for RIA’s – A View From the (Other) Bridge.]