In coordinated actions, the SEC and FinCEN have proposed changes to the definition of “financial institutions” covered by the BSA to include RIA and ERAs, and to add customer identification program (CIP) requirements for advisory firms. Pointing to the more than $115 trillion RIA space as an entry point for terrorists and other bad actors, the SEC/FinCEN have stated that they are trying to close out this loophole in the compliance regime.
If enacted, RIAs would be subject to the BSA’s AML regime, just like other financial institutions, and would be required to maintain CIPs that, at a minimum, implement reasonable procedures to require customer identity verification. Notably, RIAs can rely on their clearing firm’s CIP program provided that the clearing firm certifies on an annual basis that it has implemented its AML/CIP programs, and meets other requirements. Alternatively, RIAs would have to directly implement their own CIP program.
Timing: The public comment periods for the proposed rules have passed. It is now in the government’s hands to respond and refine the proposals. If the agencies adopt the rules, they would go into effect 60 days after publication in the federal register, with a compliance date 6 months later.
Here is a link to the joint SEC/FinCEN press release.
The Securities Litigator 