Panama Papers Show Advisors Need Treasury’s AML Rule, Groups Argue

The much-publicized Panama Papers findings released Sunday alleging that politicians, criminals and even celebrities are hiding their wealth in offshore shell companies has prompted Americans for Financial Reform and nine other groups to pressure the U.S. Treasury Department to finalize its anti-money laundering rule for investment advisors.

The groups told Treasury Secretary Jack Lew and Office of Management and Budget Director Shaun Donovan in a letter sent Monday that Treasury’s Financial Crimes Enforcement Network should impose anti-money laundering and suspicious activity reporting requirements on RIAs managing $100 million or more in assets.

Such AML rules would require these RIAs to “know their customers, report suspect transactions to law enforcement, and contribute to the work of the U.S. financial community to protect the United States from money launderers, terrorists and other wrongdoers.”

Banks, securities firms, money service businesses, insurance firms, commodity brokers and other members of the U.S. financial industry are already held to AML laws.  

“Registered investment advisors that collectively bring billions of dollars into the U.S. financial system should be subject to the same obligations,” the groups wrote.

FinCEN issued the proposed AML and suspicious activity reporting rules for advisors last August.

But the Investment Adviser Association, RIAs’ trade group, pointed out that the notion that advisors are an easy way for would-be money launderers to enter the U.S. financial system is simply not true. 

In the group’s comment letter to FinCEN on the proposed AML rules last November, the IAA explained that “advisors do not provide any way – much less a ‘low risk way’ – for a client to bypass banks, broker-dealers or other financial institutions covered by [AML regulations] and enter the U.S. financial system.”

Bob Grohowski, IAA’s general counsel, also argued that AML risks in “pure asset management are very low,” adding that AML rules for advisors “has been a slow-moving train [because] it’s not the highest AML risk out there.”