ICI Supports Efforts to Combat Money Laundering Activity

Washington, DC, March 24, 2003 - The Institute strongly supports effective rules to combat potential money laundering activity and the concept of a suspicious activity reporting (SAR) rule for mutual funds. In a recent letter to the Treasury Department, the Institute commented on several aspects of the proposed rule requiring all mutual funds to file suspicious activity reports with Treasury, including:

The Institute believes that any mutual fund SAR rule should adopt standards that take into account the nature of the fund business and the characteristics that distinguish it from traditional banking and brokerage businesses. Accordingly, the Institute urges Treasury to acknowledge that mutual funds have less information available to them in making SAR determinations than other types of financial institutions and to expressly state in the commentary accompanying the final rule that mutual funds are expected to file SARs based on the information obtained by the fund, its underwriter, or its transfer agent in the normal course of establishing a shareholder relationship or processing transactions.

The Institute also makes a number of recommendations with respect to the concept that multiple financial institutions should be able to rely on a single SAR filing to satisfy their respective reporting obligations with regard to the same transaction or series of transactions. The Institute strongly supports a section of the proposed rule that would provide that no more than one SAR would be required to be filed by the mutual funds involved in a particular transaction or any other person obligated to report the transaction, so long as the report filed contains all relevant facts.

The Institute strongly supports an exception from the general prohibition on disclosure, and recommended that Treasury clarify its scope and expressly provide, preferably in the rule text, that the sharing of information among financial institutions in order to facilitate the filing of SARs on behalf of more than one entity would not violate the non-disclosure provisions in the rule.