SEC, FinCEN Propose Customer ID Rule for Investment Advisors 

The Securities and Exchange Commission and Treasury’s Financial Crimes Enforcement Network (FinCEN) have proposed a new rule that would require SEC-registered investment advisors (RIAs) and exempt reporting advisors (ERAs) establish, document, and maintain written customer identification programs (CIPs).   

The proposal aims to prevent illicit finance activity involving investment advisor customers by enhancing the anti-money laundering and counter-terrorism financing (AML/CFT) framework. 

The agencies want RIA firms as well as exempt reporting advisors to implement new procedures for verifying customer identities “to the extent reasonable and practicable” and keep records of the information they use to verify the identities, “including name, address and other identifying information,” according to the agencies’ fact sheet. 

“Criminal, corrupt, and illicit actors have exploited the investment advisor sector to access the U.S. financial system and launder funds,” FinCEN Director Andrea Gacki said. “This proposal would help investment advisors better identify and prevent illicit actors from misusing their services, while advancing a harmonized set of CIP obligations.” 

The proposed rule will be published in the Federal Register, and a public comment period will be open for 60 days following publication. 

The rule builds on a FinCEN proposal made earlier this year to classify RIAs and ERAs as “financial institutions” under the Bank Secrecy Act, subjecting them to AML/CFT program requirements and filing suspicious activity reports.