RIAs bracing for a pending rule that would subject the firms to the same anti-money laundering regime as banks and broker-dealers may get some relief from Congress.
Lawmakers called for revisions to the Treasury Department’s AML rules during a hearing Wednesday before a House panel. With Treasury’s Financial Crimes Enforcement Network finalizing the new rule, bank executives and Republicans bashed the agency’s regulations.
The goal of AML rules is "laudable," said Blaine Luetkemeyer (R-Missouri), chair of the The Financial Institutions and Consumer Credit Subcommittee. "However, the reality is that well-intentioned regulation has spiraled out of control."
Among lawmakers and witnesses at the hearing, there was general agreement that the AML regulations, which are designed to help financial institutions detect and report financial crimes and terrorist financing, are due for an update.
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Even in the present deregulatory climate, the Treasury Department is pressing ahead with a rule to require advisors to screen for and report suspicious activity.
March 8 -
The SEC will want to see tailored policies and procedures if the Treasury Dept finalizes its rule requiring RIAs to set up anti-money laundering programs.
March 16 -
RIAs can be an easy entry point for organizations looking to move dirty money and avoid other financial entities that have formal AML procedures in place, says FinCEN.
August 27
RIAs must start disclosing more about bad actors, auditors and asset breakdowns.
AGENCY REVIEWING COMMENTS
In particular, witnesses took issue with the challenge of investigating unusual transactions that could be indicative of illicit activity, in which case the financial institution is required to file a suspicious activity report with federal authorities.
Under FinCEN's
A spokesman says that the agency is currently reviewing comments and working toward issuing a final rule. He would not speculate on the timing for when that rule might materialize.
Smaller RIAs could face a similar challenge to small banks that struggle to keep up with the paperwork. It takes American Airlines Credit Union three to five days to complete an SAR, and the bank issues up to 40 of them per month, according to general counsel Faith Lleva Anderson.
The cost of compliance technology for the AML program under the Bank Secrecy Act is “disproportionately burdensome on smaller and less complex institutions," Anderson said.
Even if some changes to the AML regulatory framework are in order, lawmakers must not let the pendulum swing too far the other way, cautioned Heather Lowe, director of government affairs at Global Financial Integrity, a think tank that studies the movement of illicit money.
"[I]t's critical that Congress understand and carefully weigh the potential benefits against the potential ramifications that may be negative before making decisions in this area," Lowe said. "Regulation and enforcement are primarily dissuasive measures, because they can carry potential liability, and we should be very careful when we decrease those dissuasive measures."
