SEC Extends AML Relief For Broker-Dealer CIP Reliance On Advisers

The SEC's action suggests that formal antimoney laundering program requirements for investment advisers may be on the horizon.

On January 9, the staff of the U.S. Securities and Exchange Commission (SEC) issued the latest in a series of letters to the Securities Industry and Financial Markets Association (SIFMA). These letters conditionally extend no-action relief that allows broker-dealers to fully rely on SEC-registered investment advisers to perform some or all of their Customer Identification Program (CIP) obligations under federal antimoney laundering (AML) requirements. The SEC extended the no-action relief for the earlier of (i) two years (January 9, 2015) or (ii) such time that investment advisers become subject to an AML program rule.1 Although the No-Action Letter has been renewed every two years ever since it was first issued in 2004,2 it references a Federal Register notice that outlines regulatory initiatives under way at various federal agencies, including the Financial Crimes Enforcement Network (FinCEN), a bureau within the Department of the Treasury responsible for administering the Bank Secrecy Act and other AML requirements.3

For fiscal year 2015, FinCEN indicates that it has drafted a notice of proposed rulemaking "that would prescribe minimum standards for AML programs to be established by certain investment advisers and to require such investment advisers to report suspicious activity to FinCEN."4 FinCEN further indicated that it has been working closely with the SEC in developing the proposed AML rules applicable to investment advisers. We will keep monitoring this development as it progresses.

Footnotes

1. See Request for No-Action Relief Under Broker-Dealer Customer Identification Program Rule (31 C.F.R. § 1023.220), SEC...