Treasury proposes rule to extend anti-money laundering regs to investment advisers

• The Treasury Department's corruption watchdog on Tuesday issued new proposed regulations to require investment advisers to abide by anti-money laundering (AML) rules similar to what banks do.
• The new rules, if adopted, would require covered investment advisers to file Suspicious Activity Reports, SARs, to FinCEN, and to disclose additional client information.
• They would apply to investment advisers who are registered with or report to the Securities Exchange Commission.

The Treasury Department's corruption watchdog on Tuesday issued new proposed regulations that would extend major pieces of the anti-money laundering (AML) rules that apply to banks to some investment advisers.

The new rules, from the Treasury's Financial Crimes Enforcement Network, or FinCEN, would require covered investment advisers to file Suspicious Activity Reports, SARs, to FinCEN, and to disclose additional information about their clients under specific circumstances.

The new rules would apply to investment advisers who are registered with or report to the Securities Exchange Commission, leaving out what FinCEN estimates to be at least 17,000 state-registered investment advisers.

The proposed regulations stop short of requiring investment advisers to adopt formal customer identification programs, like banks do. Nor would they mandate that advisers report the beneficial ownership information to FinCEN for their clients that are legal entities, like LLCs.

But these few exemptions may not last very long. FinCEN said it intends to pursue both of these regulations in the near future, according to a fact sheet about Tuesday's AML proposal.

Investment advisers manage tens of trillions of dollars, but until now, they have been largely exempt from the AML