Treasury Issues Guidance on Anti-Money Laundering Rule

Washington, DC, March 8, 2006 – The Financial Crimes Enforcement Network (FinCEN) has issued guidance concerning a new anti-money laundering rule, in response to a request from the Institute.

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.

ICI Position
ICI asked 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.

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