WASHINGTON, DC – Today, after the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued new proposed regulations to require investment advisers to abide by anti-money laundering (AML) rules similar to what banks do, U.S. Senator Jack Reed (D-RI), who has been asking for these changes for years, strongly backed the move.

Reed said Treasury’s proposal would crack down on money derived from foreign corruption, fraud, and tax evasion entering the United States through unregulated private funds. This includes money from Russian oligarchs and Chinese Communist Party officials and military companies.  Treasury’s proposal would strengthen oversight of investment advisers, who collectively manage tens of trillions of dollars, but until now, have been largely exempt from the AML regulations.

Reed, a senior member of the Banking Committee, stated: “I commend Secretary Yellen for aggressively going after dirty money and cracking down on money laundering and sanctions evasion.  This new rule is a win for U.S. national security and a blow for kleptocrats, tax cheats, and criminals who have previously gotten away with exploiting the U.S. financial system.  Treasury’s proposal would close a loophole that allows drug traffickers, Putin’s cronies, and CCP-linked entities access to the U.S. financial system.  They use this access to enrich themselves, commit crimes, and make the world less safe for Americans.  This new rule, which is long overdue, will close the loophole and combat money laundering and sanctions evasion.  It will help stop the bad guys from hiding their wealth.”

Last March, Reed led a letter to the Treasury Department urging the agency to revise and reissue proposed rules from 2015 that would have imposed anti-money laundering (AML) and suspicious activity report filing requirements on investment advisers, including advisers to private equity funds and hedge funds.

Treasury’s proposed rule will require investment advisers to verify their investors’ sources of wealth and report suspicious activity to the government, among other requirements.  That will make U.S. private equity funds and hedge funds far less accessible to Russian oligarchs, entities linked with the Chinese military, and other U.S. strategic competitors who exploit the existing rules to finance their efforts to destabilize the world and harm America.