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SEC and FinCEN Propose Customer Identification Program for RIAs and ERAs

May 23, 2024

In May 2024, the Securities and Exchange Commission (“SEC”) and Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) announced their joint proposal of a new rule that seeks to require SEC-registered investment advisors and exempt reporting advisors (together, “investment advisors”) to implement customer identification programs (“CIPs”). Under the proposed rule, investment advisors would be required to implement reasonable procedures designed to identify and verify the identity of their customers to prevent bad actors—who engage in money laundering, terrorist financing, or any other illicit finance activity—from becoming customers of an investment advisor.  

The new rule comes on the heels of FinCEN’s February 2024 notice of the proposed Anti-Money Laundering (“AML”)/Countering Financing of Terrorism (“CFT”) Program and the Suspicious Activities Report (“SAR”) Filing Requirement for Registered Investment Advisors and Exempt Reporting Advisors, which designates investment advisors as financial institutions under the Bank Secrecy Act. It also  subjects investment advisors to AML /CFT program requirements and SAR filing requirements. These two proposed rules, if adopted, will strengthen the AML/CFT compliance requirements for investment advisors and help preventing illicit financial activity in the investment advisory sector. 

EisnerAmper will continue to monitor the development of the proposed rules. In the interim, investment advisors should consider some best practices when implementing an AML Program. 

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TaNeka Ray

TaNeka Ray is a Senior Manager in the firm's Global Compliance & Regulatory Solutions Group & and has over 5 years of experience.

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