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IAA Comments on AML Proposal for Investment Advisers

April 15, 2024


On February 14, 2024, the Treasury Department released its long-anticipated proposal to impose anti-money laundering (AML) regulations on investment advisers. The proposal is broad and will capture virtually all investment advisers regardless of risk or gaps in the current framework. If finalized, this proposal will require investment advisers to invest significant resources in developing and implementing AML programs, Suspicious Activity Reporting filing procedures, and other compliance measures.

The IAA supports efforts to combat money laundering and terrorist financing, but these efforts must be risk-based and designed to fill identified gaps in the existing AML regulatory landscape rather than duplicate the protections that already exist. However, the IAA believes that the proposal is too prescriptive in certain of its specific requirements, which will make it more difficult for advisers to tailor their programs accordingly.

The IAA has submitted comments urging the Treasury Department to develop a tailored approach that effectively addresses specific risks while avoiding unnecessary regulatory burdens, especially burdens on smaller investment advisers.

What’s Changing and Why it Matters

  • AML Program Requirement: The proposal would require investment advisers to establish and implement risk-based AML programs. These programs would include measures to identify and mitigate money laundering risks, such as customer due diligence, suspicious activity reporting, and recordkeeping.
  • Suspicious Activity Reporting (SAR): Investment advisers would be required to file SARs when they suspect potential money laundering or terrorist financing activity.
  • Information Sharing: Investment advisers would be required to receive and share certain AML information with government agencies, banks, and other financial institutions.

The IAA Is Taking Action

We’re actively fighting for changes to the proposal to promote your interests and ensure regulatory clarity. Here are some key recommendations:

  • Exclude Certain Clients and Services: Exclude advisory services: not involving management of client assets; provided to clients that are already subject to AML rules; and provided to lower-risk clients.
  • Exclude Certain Investment Advisers: Exclude advisers without a place of business in the U.S. and sub-advisers that do not have a relationship with the client.
  • Ease the Practical Burden on Investment Advisers in Implementing AML Programs: Provide additional flexibility and address certain other practical issues concerning the way the proposal requires implementation of the AML program.
  • Exclude Investment Advisers from Certain AML Reporting Requirements: Investment advisers should not be subject to certain AML reporting rules because investment advisers do not, as a general matter, receive funds from, or send funds to, investors, nor do they hold investor funds.
  • Phase-in AML Program Implementation and Provide Additional Time and Streamline Requirements: Provide at least 24 months for investment advisers and at least 36 months for smaller investment advisers to implement the proposal. To ensure a consistent approach, the Treasury Department should continue coordinating with staff at the SEC regarding potential overlaps in AML program regulations with current SEC rulemakings.
  • Exclude Smaller Advisers: Exclude smaller advisers from the AML program requirements due to the significant burden the proposed changes would place on their limited resources without providing a substantial benefit.

The IAA Has Your Back

The IAA, in addition to submitting detailed comments on the proposal, is actively engaging with the Treasury Department to address our concerns and advocate for changes that benefit you.

We will provide ongoing updates and analysis through our committees, website, newsletter, and social media channels. Stay informed and connected with the latest developments.

The IAA has established a member workstream focused on AML and sanctions issues. Please contact IAA Associate General Counsel, William Nelson, directly at william.nelson@investmentadviser.org if you’d like to join the AML/Sanctions Working Group or with any questions or comments on the proposal.

Please contact the IAA legal team at iaalegalteam@investmentadviser.org with questions or comments.


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