U.S. developing anti-laundering rules for advisers

Wed Nov 16, 2011 9:51am EST

WASHINGTON, Nov 16 (Thomson Reuters Accelus) - The U.S. Treasury Department is developing long-awaited anti-money laundering rules for investment advisers and plans to involve the Securities and Exchange Commission and state regulators in the process, a senior department official said.

James Freis Jr., director of Treasury's Financial Crimes Enforcement Network (FinCEN), said regulation of investment advisers in general under the Dodd-Frank Act has progressed sufficiently far that FinCEN can "revisit" the issue, which it put on the back burner in 2008 as it worked on rules for other industries.

"FinCEN is currently revisiting the topic of investment advisers, building on the changes to that industry pursuant to the Dodd-Frank Act, the SEC rules implementing Dodd-Frank and other changes, and is working on a regulatory proposal that would require investment advisers to establish AML (anti-money laundering) programs and report suspicious activity," Freis told a Washington conference on money laundering on Tuesday.

"We look forward to working with the SEC as well as the states as we move forward," he said.

FinCEN spokesman Bill Grassano later said he could not specify which entities or professionals -- such as hedge fund managers -- will be considered "investment advisers" for the purposes of the rule. He did say, however, that FinCEN expects to rely on SEC definitions to set a standard.

A U.S. regulatory official told Thomson Reuters that the SEC has provided "technical advice" to FinCEN as part of its effort to develop AML rules for investment advisers.

There has long been speculation that FinCEN was waiting to see how Dodd-Frank requirements would be implemented for advisers before developing its own rules. It is expected that investment advisers will eventually have to enact AML programs and report suspicious activity to FinCEN, obligations broker-dealers have had for nearly a decade.

In 2008, the Treasury agency withdrew rules that it had proposed in 2002 and 2003 for investment advisers, hedge fund managers and commodity trading advisers. Since then, many have wondered when new proposals would be issued.

"This was one of FinCEN's goals in its yearly statement dated December 2010, so we were expecting them to put out something. It has just taken longer than expected," said Betty Santangelo, a partner with New York law firm Schulte Roth & Zabel.

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