SEC, Treasury Crime Unit Float Customer ID Rule for Advisors

What You Need to Know

Under the plan, SEC-registered advisors would have to establish, document and maintain written customer identification programs.
It would make it more difficult to use false identities to establish customer relationships with advisors, SEC’s Gensler says.
The plan complements FinCEN’s anti-money laundering rule for investment advisors, released in February.

The Securities and Exchange Commission and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) jointly proposed Monday a new rule that would require SEC-registered investment advisors to establish, document and maintain written customer identification programs.

The proposal, according to the agencies, “is designed to prevent illicit finance activity involving the customers of investment advisers by strengthening the anti-money laundering and countering the financing of terrorism (AML/CFT) framework” for the investment advisor sector.

“The proposed rule is designed to make it more difficult to use false identities to establish customer relationships with investment advisers,” said SEC Chairman Gary Gensler in a statement. “I support this proposal because it could reduce the risk of terrorists and other criminals accessing U.S. financial markets to launder money, finance terrorism, or move funds for other illicit purposes.”

The plan complements FinCEN’s long-awaited anti-money laundering rule for investment advisors, released in February, which would designate RIAs and exempt reporting advisors as “financial institutions” under the Bank Secrecy Act and subject them to AML/CFT program requirements and suspicious activity report (SAR) filing obligations.

Under the new proposal, RIAs and ERAs would be required to implement reasonable procedures to identify and verify the identity of their customers, among other requirements.