On August 28, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued new rules to require investment advisers to abide by anti-money laundering (AML) rules similar to what banks do. The regulation aims to prevent money laundering from foreign corruption, fraud, and tax evasion into the U.S. through unregulated private funds.
“The rule strengthens our national security,” said Sen. Jack Reed, D-R.I. “It prevents the worst actors in the world from profiting through investing in our public stock markets and in private U.S. companies.”
In a statement, Sen. Reed said that the new rule would close an avenue for foreign state-funded entities to gain access to sensitive technology. He added that the Treasury has said that Russian and Chinese government entities conceal their investments in private funds, which use to own early-stage companies in critical industries.
“Treasury has said that the Chinese and Russian government entities conceal their investments in private funds, which own early-stage companies in these industries, and then steal this technology,” he said. “This final rule ensures that institutional investors who invest in private equity funds and hedge funds, such as public pension funds and university endowments, will not have their money commingled with money from Russian oligarchs, entities linked with the Chinese military, and other transnational criminals.”
The new rule will apply to investment advisers who collectively manage tens of trillions of dollars in assets. The SEC will begin examining advisers for compliance with the new rule shortly after its publication.
“I look forward to vigorous enforcement of the rule and expect that the SEC will begin examining advisers for compliance shortly after the rule takes effect, beginning with the very largest funds that, according to press reports, have managed money for Putin’s cronies involved with the war in Ukraine,” Sen. Reed said.
Senator Reed’s office has more information on this here.
Generative artificial intelligence (AI) assisted a What’sUpNewp journalist with the reporting included in this story.
