William Barry Discusses Implications of FinCEN's First AML/CFT Priorities in Hedge Fund Law Report
"FinCEN Issues First AML/CFT Priorities"
Hedge Fund Law Report
William Barry provided commentary on the implications for investment advisers of the Financial Crimes Enforcement Network's (FinCEN's) recently issued set of national priorities for anti-money laundering (AML) and countering the financing of terrorism (CFT) policy. He noted the priorities are "part of a significant, interagency expansion and coordination of U.S. AML/CFT enforcement efforts." Barry cautioned that regulators will expect covered institutions "to incorporate the nuances of the FinCEN national priorities into their customer due diligence processes, real-time transaction monitoring and risk assessments to ensure that their compliance programs are properly identifying and calibrating risk," he added. "Regulators and the market will evaluate investment advisers and fund managers based on how their risk-based AML compliance programs incorporate [the Priorities]. The SEC Division of Examinations . . . has clearly identified AML compliance as an important component of its examination program," Barry noted. It will conduct "more frequent and more searching examinations" to identify AML/CFT risk.
Similarly, financial institution counterparties and investors will conduct more thorough operational due diligence reviews for AML/CFT risk, Barry said. "Fund managers and investment advisers with established, independently audited AML compliance programs will win business. Those whose programs are lacking will find themselves subject to reputational risk and loss of opportunity," he cautioned. Financial institutions subject to Bank Secrecy Act (BSA) compliance requirements "will require investment advisers and fund managers to demonstrate compliance consistent with the national priorities," Barry predicted. Finally, fund managers and advisers "should anticipate increasing requests for beneficial ownership information regarding entities used in holding and structuring investments," Barry noted.