The Managed Funds Association (MFA) voiced its support for the Financial Crimes Enforcement Network’s (FinCEN) proposal to delay the effective date for investment advisors to comply with certain anti-money laundering requirements.
MFA officials concur that it is necessary to extend the compliance deadline for the Anti-Money Laundering/Countering the Financing of Terrorism (AML/CFT) Program Rule to at least Jan. 1, 2028. That delay will ensure that FinCEN has sufficient time to issue necessary guidance and clarifications.
“MFA has long advocated for AML controls and strongly supports FinCEN’s efforts to combat illicit finance,” Bryan Corbett, MFA president and CEO, said. “A delay and regulatory clarity are necessary for advisers to build stronger, more effective AML programs that meet FinCEN’s goals and serve investors well.”
MFA officials say that additional clarity and guidance are needed to prevent firms from expending unnecessary resources on compliance efforts that may not align with regulatory expectations.
They outlined some key areas that FinCEN should clarify. They include:
- Defining advisory services: FinCEN must clarify which activities fall outside the scope of “advisory services,” such as administrative tasks and pre-engagement discussions.
- Third-party oversight: FinCEN should confirm that advisers can rely on representations from service providers to meet AML due diligence requirements. Additional monitoring should be risk-based and not tied to rigid, fixed schedules.
- Risk-based procedures: FinCEN should clarify expectations for applying AML procedures to private fund investors. Advisers must be able to rely on investor-provided information absent any reason to question its accuracy.
- Special due diligence requirements: FinCEN should confirm that enhanced due diligence rules do not apply to accounts held by investment advisers or regulated institutions acting as nominees. MFA also urged clarification of the “beneficial owner” definition for private funds.
- Suspicious activity report (SAR) filing obligations: FinCEN should clarify what types of transactions advisers must monitor, noting that private fund investor assets are held with custodians who themselves are obligated to file SARs where required.
- SAR sharing and confidentiality: FinCEN should allow advisers to share SARs and related information with affiliates and fund personnel, consistent with bank and broker-dealer practices.
- Funds transfer and travel rules: FinCEN should confirm that these rules have limited applicability to advisers, since private fund assets are typically held by regulated custodians.
Further, MFA urged FinCEN to align the AML Program Rule’s compliance date with the compliance date of any related AML rule to help firms develop holistic compliance frameworks.