IAA Comments on Customer Identification Program Proposal for Investment Advisers

July 22, 2024

Contact: IAA VP of Communications & Marketing Janay Rickwalder.

The Investment Adviser Association fully supports efforts to combat money laundering and terrorist financing, but additions to the robust anti-money laundering regulatory regime we already have in the United States must be risk-based and designed to fill identified gaps in the existing landscape rather than duplicate the protections that already exist.

The IAA is concerned that the Customer Identification Program (CIP) proposal lacks sufficient tailoring to the unique business models and risk profiles of investment advisers. Adding these duplicative requirements could unnecessarily burden advisers without providing significant additional benefits. These concerns are similar to concerns we raised on Treasury’s related proposal to subject investment advisers to comprehensive AML program requirements.

The IAA has urged the Treasury Department and SEC to develop a tailored approach that effectively addresses specific risks while avoiding unnecessary practical and operational burdens, especially burdens on smaller advisers. Specifically, the IAA’s recommendations include:

• Exempting low-risk clients and activities to focus resources on higher-risk areas.
• Exempting smaller advisers that pose a lower AML risk.
• Tailoring CIPs to advisers’ specific businesses.
• Leveraging existing CIP efforts within the financial system.
• Providing a more reasonable timeframe for advisers to come into compliance with any new requirements.
• Reopening the CIP proposal if and when the AML proposal is finalized.

The IAA believes that by implementing our recommendations, the Treasury Department and SEC can create a comprehensive, protective CIP framework without imposing unnecessary burdens on advisers.