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Thursday, January 02, 2003

Treasury Suggests Final Money-Laundering Rules

by: Sean Hanna, Editor in Chief

The Treasury Department is readying its final anti-money laundering rules created by the USA Patriot Act. The rules are likely to be an amalgamation of proposed regs made since the bill was passed last year. The Treasury outlined its plans in a letter to Congress released on Tuesday (click here to see the letter).

The rules are intended to put disclosure requirements for investment companies on with those for banks and brokerage firms, according to the Treasury. Separately, the Treasury is also preparing proposed regs requiring unregistered investment companies to establish customer identification and verification programs. Rules requiring Forty Act registered investment companies to establish customer identities were put in place last summer by the Financial Crimes Enforcement Network and the Securities Exchange Commission.

The letter to Congress lists the following outline of changes:

Mutual Funds:
  • Interim Final Regulation requiring the establishment of an anti-money laundering program (issued April 26, 2002). [67 FR 21117]
  • Proposed Regulation requiring establishment of customer identification programs (issued July 23, 2002). [67 FR 48318]
  • Proposed Regulation requiring implementation of due diligence programs for correspondent and private banking accounts (issued May 30, 2002). [67 FR 37736]
  • Final Regulation setting forth procedures for information sharing between federal law enforcement agencies and financial institutions and permitting voluntary information sharing among financial institutions (issued September 26, 2002) [67 FR 48348]
  • Treasury recommends requiring mutual funds to file suspicious activity reports.

    Closed-End Funds:
  • No regulations are recommended for these investment companies. Because these fundsí securities operate much like securities issued by a corporation, these funds do not appear to present a money laundering risk sufficient to warrant regulation at this time.
  • In an interval fund (a type of closed-end fund with limited repurchase rights), investors do not control either the timing or the amount of a repurchase offer. As a result, it does not appear that these funds present a money laundering risk sufficient to warrant regulation at this time. Unit Investment Trusts (UITs):
  • These fundsí securities are available only through broker-dealers or life insurance companies. Registered broker-dealers are subject to both antimoney laundering and (as of January 1, 2003) SAR reporting regulations (issued April 29, 2002 and July 1, 2002). [67 FR 21110; 67 FR 44048] Treasury and the SEC have jointly proposed to require registered brokerdealers to adopt and implement customer identification programs (issued July 23, 2002). [67 FR 48306] Treasury has proposed regulations requiring life insurance companies to implement anti-money laundering compliance programs and to file SARs (issued September 26, 2002 and October 17, 2002) [67 FR 60625; 67 FR 64067]. No new regulations are recommended for these investment companies.

    Unregistered Investment Companies:
  • Proposed regulation requiring certain unregistered investment companies to establish anti-money laundering programs (issued September 26, 2002). [67 FR 60617]
  • Treasury recommends requiring unregistered investment companies to establish customer identification and verification programs. 

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