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A Practical Approach to Implementing an AML Compliance Program

AML has become a prominent issue for private funds. As Louis Bruno prepares to address the issue at The Global Alternative Investment Management Operations (“GAIM Ops”) Summit, we discussed a few key points with him in advance…

Why has AML become a prominent issue for private funds?

(Louis Bruno) The Financial Crimes Enforcement Network’s (“FinCEN’s”) proposed rule requiring registered investment advisers to adopt AML programs will impose greater challenges for private fund managers to meet additional regulatory requirements, often with greater cost constraints and fewer resources.  However, there is a practical and effective way for fund managers to meet these obligations.

What issues should fund managers consider with respect to AML?

(LB) All AML programs should contain fundamental elements, such as maintaining policies and procedures and monitoring for suspicious activities.  But private fund managers should understand that their AML program should be tailored to the risks inherent in their organization, which often involve politically exposed persons amongst their investor base.

How should fund managers handle outsourcing of AML duties?

(LB) We find that many fund managers outsource part or all of their AML programs to third parties, usually their fund administrators.  That’s OK, but fund managers still retain the responsibility over the AML program and must perform adequate due diligence on the fund administrator’s AML program.  Regulators will expect as much. 

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