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Treasury Adopts Suspicious Activity Reporting Rule for Mutual Funds

Washington, DC, May 4, 2006 - The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has adopted a rule that will require mutual funds to report suspicious transactions. The new rule, which has a 180-day implementation period, will apply to transactions occurring after October 31, 2006.

Background
In February 2006, the Institute asked the Financial Crimes Enforcement Network (FinCEN) to concur with ICI's interpretation of a new anti-money laundering rule adopted in January 2006. The rule, relating to correspondent accounts for foreign financial institutions, 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.

The rule recently adopted by FinCEN requires mutual funds to report any suspicious transaction relevant to a possible violation of law or regulation. Transactions involving funds or other assets of at least $5,000 are reportable if the mutual fund knows, suspects, or has reason to suspect that the transaction:

  • involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade any federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation;
  • is designed to evade the requirements of the Bank Secrecy Act;
  • has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the mutual fund knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or
  • involves use of the mutual fund to facilitate criminal activity.

Related Links
In addition to the links below, a section of this website is devoted to a host of financial services issues, including anti-money laundering and PATRIOT Act topics.