Congress is weighing legislation that would require investment advisers and other “gatekeepers” to develop and maintain anti-money-laundering policies and procedures.
If passed, the ENABLERS Act would require the Treasury Department to come up with “basic due diligence rules” for IAs, “art dealers, attorneys involved in financial activity, company service providers (those who create companies for a fee), accountants, PR firms and third-party payment providers.” It would also eliminate a 2002 exemption to the PATRIOT Act that protected real estate professionals and luxury car, ship or aircraft dealers from having to adopt anti-money-laundering P&Ps.
It’s sponsored by two Democrats, representatives Tom Malinowski of New Jersey and Steve Cohen of Tennessee, and two Republicans, representatives Maria Elvira Salazar of Florida and Joe Wilson of South Carolina. The quartet calls itself the Caucus Against Foreign Corruption and Kleptocracy. They say they were inspired by revelations in the Pandora Papers, a multinational news investigation into how world leaders, terrorists and mobsters hide their money, much of it in the US.
“The problem,” the group said in a statement, “is that too many criminals, human rights abusers and corrupt foreign officials have now found new ‘ENABLERS’: Real estate transactions, private equity investments, perpetual trusts and/or legal maneuvers that completely sidestep the prior requirements put in place to keep our country secure and free of corruption. With the ENABLERS Act, we’re closing the loopholes that remain open to terrorists, foreign dictators, militias and cybercriminals.”
‘Trending in that direction’
Whether or not the legislation becomes law – groups such as the American Bar Association are dead-set against it – experts agree that it’s only a matter of time before private fund advisers must comply with anti-money-laundering laws.
“I think things are trending in that direction,” says Leslie Bailey, vice-president at LexisNexis Risk Solutions. “It’s a global issue.”
The Biden administration is the first in American history to declare that corruption is a threat to national security. FinCEN is currently working on a massive database of every beneficial owner for every business in the US, except for private fund advisers. SEC chairman Gary Gensler is weighing rules that would impose new disclosure rules on fund advisers – possibly even requiring them to list beneficial owners.
The wise move is to get ahead of the changes, says Julie Copeland, a partner with compliance consultant StoneTurn. “Why not start looking at options now?” she says. “It doesn’t mean you have to put them in now.”
Start by doing a transactions analysis, Copeland suggests, and consider expanding customer forms. “If this kind of thing is going to become law, why not do it in advance so when the regulators come in, they say, ‘Hey, this asset manager is ahead of the curve?’ Yes, you do get brownie points.”