May 13, 2024
Contact: IAA VP of Communications & Marketing Janay Rickwalder.
Statement from Gail Bernstein, IAA General Counsel
The Financial Crimes Enforcement Network (FinCEN) and the SEC jointly released a Notice of Proposed Rulemaking (proposal) outlining potential customer information program (CIP) requirements for SEC-registered investment advisers and exempt reporting advisers (SEC Advisers). The proposal would require SEC Advisers to implement reasonable procedures to verify the identities of their clients. This proposal complements a separate FinCEN proposal, where the IAA submitted comments, that would subject SEC Advisers to comprehensive AML program requirements (AML Proposal).
The IAA fully 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.
Based on our initial review, as with the AML proposal, the IAA is concerned that the sweeping proposal will capture virtually all SEC Advisers and will not accomplish the stated policy goals because it lacks sufficient tailoring to the unique business models and risk profiles of SEC Advisers.
We urge the SEC and the Treasury Department to develop a tailored approach that effectively addresses specific risks while avoiding unnecessary regulatory burdens, especially burdens on smaller SEC Advisers.
Additionally, given the interrelated nature of the AML and CIP proposals, we believe they should be considered holistically. We urge FinCEN to reopen the comment period for the AML Proposal to allow commenters to supplement their submissions in light of the CIP rule proposal.
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