Clifford Chance

FinCEN Proposes Expanding the BSA to Investment Advisers... Again

April 1, 2024

Includes Broad Extraterritorial Application and Potential Confusion over "Customer's Customer" Due Diligence

REGISTERED INVESTMENT ADVISERS AND EXEMPT REPORTING ADVISERS WITHIN SCOPE

On February 12, 2024, FinCEN issued a Notice of Proposed Rule Making (NPRM) that would add investment advisers – both Investment Advisers registered with the US Securities & Exchange Commission (SEC) (RIAs) and investment advisers eligible for the private fund adviser exemption under the Investment Advisers Act of 1940, as amended (Advisers Act) who report as Exempt Reporting Advisers (ERAs) – to the list of businesses classified as "financial institutions" under FinCEN's regulations. The NPRM would subject both groups to most of the Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) requirements under the Bank Secrecy Act (BSA) that already exist for other financial institutions such as banks and securities brokers-dealers. Under the proposal, an investment adviser subject to the rule would have to comply with the proposed rule's requirements within 12 months of its ultimate effective date (which is yet to be determined).

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