ICI Asks Treasury for Interpretation of Anti-Money Laundering Rule

Washington, DC, February 3, 2006 - The Institute has asked the Financial Crimes Enforcement Network (FinCEN) to concur with ICI's interpretation of a new anti-money laundering rule.

Background
In January FinCEN adopted a rule relating to correspondent accounts for foreign financial institutions. The rule requires every mutual fund, by April 4, 2006, to establish a due diligence program to detect and report money laundering activity involving correspondent accounts established, maintained, administered, or managed for foreign financial institutions. The rule also requires mutual funds, by October 2, 2006, to make all existing accounts subject to the new due diligence programs for correspondent accounts.

ICI Position
In a recent letter, ICI asks for FinCEN's concurrence with the Institute's interpretation of the new rule, within the context of the National Securities Clearing Corporation's Fund/SERV system. Under ICI's interpretation, the rule does not apply to a Fund/SERV account established, maintained, administered, or managed by a mutual fund for an NSCC member firm that is a U.S. financial institution, even if the NSCC member firm's customer is a foreign financial institution. ICI's letter points out that foreign financial institutions only could access mutual funds through Fund/SERV by conducting transactions through a U.S. financial institution, subject to that institution's anti-money laundering procedures, or by conducting transactions directly with the mutual fund, subject to the fund's anti-money laundering procedures.

Given the April 4, 2006 implementation deadline and the fundamental importance of Fund/SERV to the processing of purchases, redemptions, and exchanges of mutual fund shares, ICI has asked FinCEN to respond as soon as possible.

Related Links
A section of this website contains more information about funds' anti-money laundering efforts.