U.S. Treasury Targets Money Laundering with New Rules for Investment Advisers

The U.S. investment sector is facing new anti-money laundering (AML) measures as the Biden administration puts forth regulatory changes to enhance the transparency and integrity of financial transactions. These developments are part of a comprehensive initiative to combat money laundering, illicit finance, and fraud within the nation's financial system.

New Recordkeeping and Reporting Requirements

The Financial Crimes Enforcement Network (FinCEN), an agency of the Treasury Department, introduced a proposal that obliges investment advisers to implement AML programs. The proposed rules, announced on a Tuesday, will also require advisers to report any suspicious activities they observe from their clients. This step is seen as pivotal in closing the regulatory gaps that have historically permitted unscrupulous actors to maneuver illicit funds through investment channels.

FinCEN Director Speaks Out

In a statement, FinCEN Director Andrea Gacki expressed the intention behind the new regulations, which aim not only to level the playing field for those active in the regulatory environment but also to safeguard U.S. economic and national security while protecting American businesses from being channels for unlawful financial activities.

Biden Administration's Wider Efforts

This proposal joins a series of recent measures by the Biden administration focused on financial crime. One such measure aims at real estate professionals, mandating the reporting of information on non-financed, all-cash purchases of residential properties involving legal entities. These transactions are considered vulnerable to money laundering operations.

The Beneficial Ownership Registry

Apart from targeted rules, FinCEN has introduced a beneficial ownership registry. The database is anticipated to store personal details pertaining to the owners of a projected 32 million U.S. businesses, and Secretary Janet Yellen disclosed that 100,000 businesses have already commenced registration.

Transparency in the Financial System

The new rules for investment advisers are designed to shed more light on financial transactions, thus aiding law enforcement in the detection of criminal funds entering the U.S. economy. According to FinCEN announcements, the rule may evolve to encompass the recording of detailed client ownership information.

Global Corruption and Transparency Goals

The White House previously articulated a strategy targeting anticorruption efforts aimed at elevating financial system transparency domestically and internationally, while preventing exploitative actors from profiting within the U.S.

FinCEN's Risk Assessment Findings

Following their risk assessment, the Treasury identified multiple instances where sanctioned individuals and those involved in criminal activity utilized investment advisers to infiltrate the American markets, including securities and real estate investments. These activities also encompassed attempts by Chinese and Russian entities to access sensitive information and technology through these channels.

The public has until April 15 to submit comments on the proposed regulation, signaling an opportunity for stakeholders to voice their perspectives before the rules are potentially enacted.

Treasury, Regulations, Advisers