CHICAGO (HedgeWorld.com)–Anti-money laundering regulations and compliance surrounding the USA PATRIOT Act were the topics at the most recent meeting of the Chicago chapter of the 100 Women in Hedge Funds.
The group’s Nov. 14 roundtable, “Behind The Veil Of The USA PATRIOT Act,” featured the viewpoints of industry experts. The evening’s panelists were: Stephanie Pries, vice president and senior legal counsel, Managed Funds Association; Patricia Gillman, Schiff, Hardin & Waite; Karen Wuertz, senior vice president, National Futures Association; and Stephen Strombelline, Barclays Capital.
Ms. Gillman was the moderator for the panel. Ms. Pries opened the discussion by giving a brief overview of the PATRIOT Act and the proposed regulation from the U.S. Treasury Dept.
One of the big questions that remain at the MFA is who will ultimately have the authority to enforce the regulations, Ms. Pries said. By default the federal inspection authority would go to the Internal Revenue Service, but other agencies such as the Securities and Exchange Commission and the Commodity Futures Trading Commission may also be interested in compliance oversight.
Other snags also have yet to be addressed in the proposed anti-money laundering rules. As proposed, the regulations would also apply to offshore funds and administrators (if they have at least one U.S. investor). Also if the anti-money laundering responsibility is delegated to third parties, then those organizations would be subject to inspection of records even if they are located outside of the United States, Ms. Pries said.
Still hedge funds themselves need compliance guidelines. Mr. Strombelline, Barclays’ compliance officer, gave attendees the simplest advice saying that hedge funds need confidence in the “know your customer” approach used in-house or by outside providers. Handling the compliance aspect from the prime brokers’ point of view, Mr. Strombelline said that officials need to be confident that their customer is competent in deterring money launders from doing business with them.
MFA’s Ms. Wuertz told the group that documentation and detailed information in that documentation of the anti-money laundering program is key. An annual audit is also important to keep an audit trail of the compliance process.
The comment period for the proposed Treasury regulations on unregistered companies expires on Nov. 25. In its role of industry lobbyist, the MFA is drafting its response, though a lot has yet to be done concerning anti-money laundering, as the war on terrorism continues. One panelist said she believed the rules would not be final for another six months.