After decades of debate and attempts to hold registered advisers and private funds accountable for anti-money laundering (AML) programming requirements, FinCEN’s recent approval of final rules serves as a potential wake-up call for registered advisers and exempt reporting advisers required to establish risk-based AML programming requirements by the beginning of next year. Advisers should not take AML programming requirements lightly. They would be wise to look closely at regulatory enforcement imposed on other financial institutions with an eye toward not making similar mistakes when establishing risk-based programming. Indeed, there are several key areas advisers should pay attention to before they establish AML programming. One hurdle facing advisers in establishing risk-based AML programming will involve addressing what “suspicious activity” will need to be identified and reported under the new rules. The final rule provides that the advisers must implement a risk-based AML program. Advisers should look at the type of transaction monitoring they decide to use. While FinCEN stated that the rule does not require advisers to implement automated transaction monitoring systems, depending on the type of transactions and size of the firm, it seems unlikely manual monitoring would be deemed reasonable for all advisers. The key factor in assessing reasonable transaction monitoring lies with the investment adviser’s risk profile. Each investment adviser’s risk profile will be different, so out-of-the-box technology solutions may not work for all advisers. FinCEN expects that the adviser has “reasonable internal policies, procedures, and controls to monitor and identify unusual activity, and adequate resources to identify, report, and monitor suspicious activity.” In certain situations, delegation of certain aspects of transaction monitoring may be reasonable for advisers. For example, qualified custodians that custody customer funds may have existing transaction monitoring systems that can be leveraged by the adviser. Advisers leveraging such technology, however, remain responsible for such transaction monitoring, and, if applicable, reporting to FinCEN on suspicious transactions identified through such monitoring. Explore HR Tech News for the latest advancements in Human Resources Technologies insightful updates from industry experts!  Source: https://www.corporatecomplianceinsights.com/investment-advisers-begin-critical-year-aml-compliance-planning/