SEC Extends AML Relief for Broker-Dealer CIP Reliance on Advisers

January 16, 2015

The SEC’s action suggests that formal antimoney laundering program requirements for investment advisers may be on the horizon.

On January 9, the staff of the U.S. Securities and Exchange Commission (SEC) issued the latest in a series of letters to the Securities Industry and Financial Markets Association (SIFMA). These letters conditionally extend no-action relief that allows broker-dealers to fully rely on SEC-registered investment advisers to perform some or all of their Customer Identification Program (CIP) obligations under federal antimoney laundering (AML) requirements. The SEC extended the no-action relief for the earlier of (i) two years (January 9, 2015) or (ii) such time that investment advisers become subject to an AML program rule.[1] Although the No-Action Letter has been renewed every two years ever since it was first issued in 2004,[2] it references a Federal Register notice that outlines regulatory initiatives under way at various federal agencies, including the Financial Crimes Enforcement Network (FinCEN), a bureau within the Department of the Treasury responsible for administering the Bank Secrecy Act and other AML requirements.[3]

For fiscal year 2015, FinCEN indicates that it has drafted a notice of proposed rulemaking “that would prescribe minimum standards for AML programs to be established by certain investment advisers and to require such investment advisers to report suspicious activity to FinCEN.”[4]FinCEN further indicated that it has been working closely with the SEC in developing the proposed AML rules applicable to investment advisers. We will keep monitoring this development as it progresses.


If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Washington, D.C.   New York Philadelphia

[1]See Request for No-Action Relief Under Broker-Dealer Customer Identification Program Rule (31 C.F.R. § 1023.220), SEC Staff No-Action Letter (Jan. 9, 2015) (No-Action Letter) available here.

[2]See Financial Recordkeeping and Reporting of Currency and Foreign Transactions / Broker-Dealer Customer Identification Rule, SEC Staff No-Action Letter (Feb. 12, 2004), available here.

[3]. The Currency and Foreign Transactions Reporting Act of 1970, also known as the Bank Secrecy Act, is codified at 12 U.S.C. § 1829b; 12 U.S.C. §§ 1951–1959; 18 U.S.C. §§ 1956, 1957, 1960; and 31 U.S.C. §§ 5311–5314 and 5316–5332.

[4]See Introduction to the Unified Agenda of Federal Regulatory and Deregulatory Actions, 79 Fed. Reg. 76455, 76609 (Dec. 22, 2014) (Unified Agenda). The Unified Agenda also indicates that FinCEN plans to amend the Bank Secrecy Act’s implementing regulations to bring funding portals within the rules applicable to brokers and dealers in securities.