New U.S. Rules For Investment Advisors Could Bring Aggressive Scrutiny on Non-U.S. Individuals
The U.S. Financial Crimes Enforcement Network (FinCEN) has proposed rules extending U.S. anti-money laundering program requirements to investment advisors. This is the latest U.S. move to put the assets and financial transactions of non-U.S. ultra-high-net-worth individuals under scrutiny, putting them at risk. Individuals and their advisors should take proactive steps to protect their legitimate interests.
March 21, 2024
New rules proposed by the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) would extend U.S. anti-money laundering program requirements to investment advisors. If implemented, the rules will become the latest in a series of moves by U.S. authorities to scrutinize the assets and financial transactions of ultra-high-net-worth individuals (UHNWIs) – including those located outside the U.S. The new rules include provisions requiring financial advisors to file reports with U.S. authorities about any so-called “suspicious” activity on the part of their clients or face investigation and prosecution.
This increases the risk that non-U.S. UHNWIs can become the target of investigations, potentially leading to global asset freezes, seizures, or other penalties. At-risk clients and their advisors can take proactive steps to protect legitimate interests and withstand this newly anticipated scrutiny by U.S. authorities.
The new rules require investment advisors registered with the U.S. Securities and Exchange Commission (SEC), or those exempted from registration but still required to report to the SEC, to implement an anti-money laundering and counterterrorism financing compliance program; file suspicious activity reports with FinCEN; and keep records such as those related to fund transfers.
The rule would also allow information sharing between FinCEN, law enforcement agencies, and certain financial institutions. FinCEN has pointed to the use of U.S. investment advisors by sanctioned individuals, corrupt officials, tax evaders, and other criminals looking to access U.S. financial markets.
However, similar concerns have led U.S. authorities to err on the side of acting aggressively in the past, putting individuals who have done nothing wrong at risk of U.S. government investigation and enforcement.
At-risk UHNWIs should take proactive steps to reduce their risk and maintain access to investment advice, including:
With U.S. authorities continuing to expand enforcement efforts outside the United States, high-profile UHNWIs are now at risk of investigations being launched against them by their own advisors or financial institutions. At-risk individuals can seek to mitigate this risk by taking proactive steps now to preserve their lawfully obtained assets from undue scrutiny.
Kobre & Kim is a global law firm focusing on cross-border disputes and investigations, often involving fraud and misconduct.
To preserve the assets, liberty and reputation of UHNWIs with global business interests, our firm: