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News / U.S. Presents New Anti-Money Laundering Regulations Subject To Investment Advisers

U.S. Presents New Anti-Money Laundering Regulations Subject To Investment Advisers

The new rule would mandate investment advisers to actively monitor and report any potential instances of money laundering to government authorities.

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The Biden administration is taking proactive steps to combat money laundering, illicit finance, and fraud within the American financial system by unveiling new recordkeeping regulations for U.S. investment advisers.

As part of this effort, the Treasury Department’s Financial Crimes Enforcement Network has put forth a proposal that would mandate the development of anti-money laundering programs for investment advisers that require the filing of reports with the government in the event of suspicious activity by clients.

Investment advisors are pivotal custodians of the economy when it comes to investments of trillions of dollars, as FinCEN Director Andrea Gacki noted in a statement. “This rule is to make the regulatory system fair where the American economy and nation will be protected as well as businesses of America.”

The proposed draft rule is one that was originally implemented back in 2015 and is now being brought into play even though it was only a temporary measure. This rule now recognizes investment advisers as money transmitters with a requirement to adopt anti-money laundering and counter-financing of terrorism programs. Such operational parameters would involve advisers who are registered with and report to the U.S. Securities and Exchange Commission as well as the ones with an exemption of registration.

The initiative is the latest piece that has followed other recent decisions by the Biden administration that deal with financial crimes specifically for the real estate sector.

The Treasury Department, last week, unveiled a proposal that those working in real estate were required to provide data to the department about the residential real estate to legal entities sales with underlying nonfinanced properties. All-cash purchases of homes and land are considered at the level of the most risky for the legalization of illegal money. The rule keeps the privacy regarding sales to individual persons.

The new investment adviser rule adopted by FinCEN “will continue to enhance the transparency of the U.S. financial system and will also help law enforcement to actualize the identification of illicit proceeds once enforced into the American economy”, the FinCEN document states.

After the plan presented by the White House in 2021 to invest in and promote anticorruption transparency and more ethics in financial systems, the Treasury Department completed a risk assessment and discovered companies where sanctions evaders, tax criminals and other wrongdoers have rented investment brokers deals with U.S. securities and real estate. As Tresuary’s release says: “Investment advisers provide entry points for sanctioned individuals, tax evaders, and other criminal actors to invest in the U.S”.

The risk assessment also uncovered cases of Chinese and Russian nationals having strong influences on investment advisers and thus exploiting the cumulative sensitive information and the exposure to technology.

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Legal & Law Enforcement

Published Date

February 16, 2024

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