Investment Adviser Alert: SEC and FinCEN Propose New AML/CFT Requirements

On May 13, The SEC and FinCEN jointly proposed a new rule requiring certain advisors to implement Customer Identification Programs (CIPs). This move aims to strengthen anti-money laundering (AML) and counter-terrorism financing (CFT) efforts within the investment sector.

From the proposal fact sheet:

The proposal would require RIAs and ERAs to, among other things, establish, document, and maintain written CIPs appropriate for their respective sizes and businesses. The CIP would include risk-based procedures for verifying the identity of each customer to the extent reasonable and practicable within a reasonable time before or after the customer’s account is opened. The procedures would have to enable the RIA and ERA to form a reasonable belief that it knows the true identity of each customer. RIAs and ERAs would be required to obtain certain identifying information with respect to each customer, such as the customer’s name, date of birth or date of formation, address, and identification number. The proposed rule would also include procedures for, among other things, maintaining records of the information used to verify a customer’s identity and notifying customers that the adviser is requesting information to verify their identities.

RIAs that currently advise retail investors may already have customer information procedures when opening accounts and may already perform a client search against the SDN list (OFAC’s specially designated nationals lists) as part of industry best practices. 

Whether or not the proposed rule become final, Bates provides a suite of services to help firms handle AML obligations and implement best practices. If you have AML or CIP questions, contact Bates today to ease your concerns.