Must-Pass Defense Bill Includes AML Rule for Advisors

According to Morgan, that proposed rule change "has languished, perhaps in part because of doubts about whether FinCEN had the statutory authority for such a substantial modification of the definition of 'financial institution' under the Bank Secrecy Act."

At a recent House Financial Services Committee hearing, FinCEN's acting director, Himamauli Das, said that FinCEN is "exploring regulation of investment advisors, and in particular looking to apply the FinCEN special collection [anti-money laundering] authorities on the investment advisor — potentially private equity sector — in order to support any future rulemaking," Braddock Stevenson, former deputy associate director of enforcement at FinCEN and currently a partner at Paul Hastings, said on a recent episode of SEC Roundup.

"If Congress and the President provide that statutory authority by turning this bill into law, the same onerous AML compliance obligations that apply to banks and brokers will apply to investment advisors large and small," Morgan added. "This presents a sea change for the industry."