U.S. Proposes to Subject Non-U.S. SEC Registered Investment Advisers to Anti-Money Laundering Rules

September 22, 2015

The United States is proposing rules that, for the first time, would subject investment advisers registered or required to be registered (RIAs) with the U.S. Securities and Exchange Commission (SEC) under the Investment Advisers Act of 1940, as amended, including non-U.S. RIAs, to anti-money laundering (AML) regulation.

The proposed rules would require RIAs to “develop and implement a written [AML] program reasonably designed to prevent the investment adviser from being used for money laundering or the financing of terrorist activities and to achieve and monitor compliance with the applicable provisions of the Bank Secrecy Act . . . and the implementing regulations thereunder.” The proposed rules also would require RIAs to report suspicious activity to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

In a departure from existing practice, the proposal would extend these rules to RIAs wholly outside the United States and is not limited to an RIA’s U.S. clients. As discussed below, this may pose significant challenges for non-U.S. RIAs, as U.S. AML rules may not be consistent with local requirements. Moreover, some non-U.S. RIAs may be subject to local rules restricting their ability to file suspicious activity reports (SARs) with FinCEN.

This Dechert OnPoint provides a brief discussion of some of the key components of the proposed rules and how they could affect non-U.S. RIAs. For a detailed description of the substantive requirements included in the proposed rules, please see Dechert OnPoint "FinCEN Proposes Anti-Money Laundering Regulation for Investment Advisers."

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