On Oct. 30, 2008, the Financial Crimes Enforcement Network (“FinCEN”), a bureau of the United States Department of Treasury, withdrew the proposed anti-money laundering program (“AML Program”) rules for unregistered investment companies (such as hedge funds), commodity trading advisors and investment advisers. The now-withdrawn AML Program rules have been pending for several years. In particular, the AML Program rules for unregistered investment companies have been pending since Sept. 26, 2002, and the AML Program rules for commodity trading advisors and investment advisers have been pending since May 5, 2003. Yesterday’s announcement comes after FinCEN’s statement in June 2007 that it would be taking a fresh look at bank secrecy regulation to ensure that it is being applied efficiently and effectively across different industries. The now-withdrawn regulations drew extensive comment from the regulated industries.
In its press release, FinCEN explained that it decided to withdraw the AML Program rules as a result of the long passage of time since the rules were first published in 2002 and 2003. During the intervening years since the now-withdrawn AML Program rules for unregistered investment companies, commodity trading advisors and investment advisers were first proposed, FinCEN has concluded AML Program rulemaking procedures for banks, broker-dealers and futures commission merchants. FinCEN has now determined that it would not proceed with Bank Secrecy Act (“BSA”) requirements for unregistered investment companies, commodity trading advisors and investment advisers without first publishing new proposals and allowing comments from industry and other interested parties.
FinCEN also stated that it will continue to consider the extent to which BSA requirements should be imposed on unregistered investment companies, commodity trading advisors and investment advisers. FinCEN acknowledged that those entities are not outside the current BSA regulatory regime, since financial transactions of those entities and their clients must be conducted through, and their assets carried by, other financial institutions that are subject to BSA regulations, such as banks, broker-dealers and futures commission merchants.