MFA urged the Financial Crimes Enforcement Network (FinCEN) to repropose its anti-money laundering/countering the financing of terrorism (AML/CFT) rule in a comment letter submitted today. While MFA strongly supports FinCEN’s goal of combatting money laundering, terrorist financing, and other illicit financial activity, it believes that the proposed rule inappropriately applies AML/CFT requirements to private funds. The AML/CFT proposal is predicated on the flawed premise that investment managers receive and custody fund investor assets. In fact, fund investor capital flows between administrators, custodians, banks, and dealers – not private fund managers.
Predicating the proposal on a flawed premise resulted in it:
- Inaccurately assessing the AML/CFT risks in private funds, particularly given that private funds typically do not accept investments in cash
- Failing to account for the strong, well-established AML/CFT controls of the sophisticated financial institutions engaged by private funds
- Leaving private fund managers uncertain of the requirements to meet their AML/CFT responsibilities
MFA urges FinCEN to repropose the rule and fix its flawed premises in order to address how the AML/CFT requirements will apply in the private funds context. This step will allow for rulemaking that is tailored to the funds context and the specific AML/CFT risks posed by the varying and numerous investment advisers that constitute Covered IAs. A well-considered and appropriately tailored rule benefits both FinCEN and Covered IAs in providing clear guidelines and requirements to shield against the AML/CFT risks that can arise in the private fund industry.
