FinCEN, SEC propose requiring investment advisers to collect customer identifications

The Securities and Exchange Commission and Financial Crimes Enforcement Network today proposed a new rule to require SEC-registered investment advisers and exempt reporting advisers to adopt customer identification programs, or CIPs. In a joint statement, the agencies said the rule requires advisers to adopt a written CIP program and implement risk-based procedures for verifying customer identity so they can have “a reasonable belief” about the true identity of their customers.

The proposed rulemaking complements a separate FinCEN proposal in February to designate advisers as “financial institutions” under the Bank Secrecy Act and subject them to anti-money laundering/combating the financing of terrorism requirements and suspicious activity report filing obligations, the agencies said. The new proposal is generally consistent with the CIP requirements for other financial institutions, such as brokers or dealers in securities and mutual funds, they added.

“Criminal, corrupt and illicit actors have exploited the investment adviser sector to access the U.S. financial system and launder funds,” FinCEN Director Andrea Gacki said. “This proposal would help investment advisers better identify and prevent illicit actors from misusing their services while advancing a harmonized set of CIP obligations.”