MMI Submits Comments to FinCEN on Proposed AML Program Rule for RIAs

On September 1, 2015, the Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, published a notice of proposed rulemaking requiring investment advisers registered with the SEC to establish anti-money laundering programs (AML) and to report suspicious activity to FinCEN pursuant to the Bank Secrecy Act (BSA).

MMI supports appropriate measures to safeguard the United States financial system against fraud, money laundering, terrorist financing, and other financial crime, however, the Proposal broadly includes all RIAs without considering the limited access to client information that RIAs have in managed account programs that are sponsored by a financial institution which has the primary relationship with the program’s underlying clients. In this regard, financial institutions, such as bank custodians and registered broker-dealers, have existing independent AML programs and SAR reporting obligations that already apply to their relationships with the underlying clients of a managed account program. As a result, imposing AML program and SAR obligations on RIAs in the context of managed account programs will be redundant to, and potentially less effective than, the efforts already engaged in by the financial institutions that sponsor these programs.

For the past two months, members of MMI’s Legal & Compliance Committee worked in collaboration with MMI's retained counsel, Morgan, Lewis & Bockius, to develop comments on FinCEN’s proposal. The comment letter, which was submitted to FinCEN on November 2, 2015, is available here for review (members only PDF).