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SEC and FinCEN Propose Stricter Anti-Money Laundering Rules for Investment Advisors

Posted on May 28th, 2024 at 10:22 AM
SEC and FinCEN Propose Stricter Anti-Money Laundering Rules for Investment Advisors

From the desk of Jim Eccleston at Eccleston Law 

The Securities and Exchange Commission (SEC) and the Financial Crimes Enforcement Network (FinCEN) have proposed a rule to enhance anti-money laundering (AML) and counter-terrorism practices for registered investment advisers (RIAs) and exempt reporting advisers, including private fund and venture capital advisors. If approved, the rule will require these advisers to establish customer identification programs (CIPs) and
implement procedures to verify their customers' identities.

As reported by FundFire, the proposed rule aims to curb money laundering, terrorism financing, and other illicit activities by making it more difficult for bad actors to use false identities to establish customer relationships. SEC Chair Gary Gensler stated that the rule is designed to enhance the integrity of customer identification in the advisory sector.

The rule will affect nearly 15,000 RIAs managing approximately $114 trillion in assets and about 5,550 exempt reporting advisers managing $5.2 trillion in assets. Those advisers will need to comply with CIP requirements similar to those already in place for broker-dealers and mutual funds.

The Investment Adviser Association (IAA) has expressed concerns about the broad scope of the proposal, urging the SEC and Treasury to adopt a tailored approach that addresses specific risks without imposing unnecessary regulatory burdens, particularly on smaller advisers.

 

Eccleston Law LLC represents investors and financial advisors nationwide in securities, employment, transition, regulatory, and disciplinary matters.

Tags: eccleston, eccleston law, fincen

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