The much-publicized Panama Papers findings released alleging that politicians, criminals and even celebrities have been hiding their wealth in offshore shell companies has prompted Americans for Financial Reform and nine other groups to pressure the U.S. Treasury Department to finalize its anti-money laundering rule for investment advisers.
The groups told Treasury Secretary Jack Lew and Office of Management and Budget Director Shaun Donovan in a letter sent Monday that Treasury's Financial Crimes Enforcement Network should impose anti-money laundering and suspicious activity reporting requirements on RIAs managing $100 million or more in assets.
Such AML rules would require these RIAs to "know their customers, report suspect transactions to law enforcement, and contribute to the work of the U.S. financial community to protect the United States from money launderers, terrorists and other wrongdoers."
Banks, securities firms, money service businesses, insurance firms, commodity brokers and other members of the U.S. financial industry are already held to AML laws.
"Registered investment advisers that collectively bring billions of dollars into the U.S. financial system should be subject to the same obligations," the groups wrote.
FinCEN issued the proposed AML and suspicious activity reporting rules for advisers last August.
But the Investment Adviser Association, RIAs' trade group, pointed out that the notion that advisers are an easy way for would-be money launderers to enter the U.S. financial system is simply not true.
In the group's comment letter to FinCEN on the proposed AML rules last November, the IAA explained that "advisers do not provide any way – much less a 'low risk way' – for a client to bypass banks, broker-dealers or other financial institutions covered by [AML regulations] and enter the U.S. financial system."
Bob Grohowski, IAA's general counsel, also argued that AML risks in "pure asset management are very low," adding that making AML rules for advisers "has been a slow-moving train [because] it's not the highest AML risk out there."
Grohowski argued that "FinCEN's expansive proposal is based on a fundamental misunderstanding of the nature and scope of the services advisers provide."
IAA urged FinCEN in November to "carve back" the proposal to extend anti-money laundering regulations to all SEC-registered investment advisers, and asked for a range of exemptions for advisers and advisory services that the IAA said do not raise money-laundering risks.
Under the FinCEN proposal, advisers must also report suspicious activity to FinCEN pursuant to the Bank Secrecy Act, and FinCEN has also included investment advisers in the general definition of "financial institution," which, among other things, would require them to file Currency Transaction Reports and keep records relating to money transfers.
The rule is still pending, FinCEN spokeswoman Candice Basso said.
"As usual, FinCEN is considering public comments as it crafts the final rule," she said.
The proposal would apply to those advisers registered with the Securities and Exchange Commission, including advisers to certain hedge funds, private equity funds and other private funds.
FinCEN said it would delegate its authority to examine advisers for compliance with these requirements to the SEC.
FinCEN argued the rules are necessary for advisers because illicit actors seeking to access the financial system may attempt to gain such access through an investment adviser as a means to avoid detection of their activity which might otherwise occur in dealings with financial institutions that have AML programs and suspicious activity reporting requirements.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
