Treasury Department Proposing Advisors Establish Anti-Money-Laundering Safeguards

Generally, the proposed rule requires investment advisors to establish AML programs that have four components. First, advisors would have to establish and implement policies, procedures and internal control reasonably designed to prevent the advisor from being used to launder money or finance terrorist activities.

Second, the rule says there must be independent testing of compliance to be conducted by company personnel or a qualified outside party.

Third, the rule says advisors must designate a person or persons responsible for implementing and monitoring the operations and internal controls of the program.

Finally, the rule says there must be ongoing training for relevant employees.

Details on implementation of each of these program elements are spelled out in the proposed rule, which is available from the Treasury Departments Web site at www.treas.gov.

Carl Wilkerson, chief counsel with the American Council of Life Insurers, Washington, says that life insurers will be reading the proposed rule very carefully.

Many life insurers, he says, have investment advice units either directly or through affiliates.

On first reading, Wilkerson says, the proposal has many commendable aspects, such as a risk-based approach that focuses AML resources on activities that have the greatest probability of money laundering.

In addition, he says, the proposal does not take a “one size fits all” approach.

Reproduced from National Underwriter Edition, May 5, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.