Dear Clients: 

Please see the following message from FundLaw regarding FinCen's withdrawl of its AML proposals.  If you have any questions, you may contact Barbara Mallon at (312) 346-8892.

The Department of the Treasury's Financial Crimes Enforcement Network has withdrawn its

long-standing proposals to require investment advisers, commodity trading advisors, and

hedge funds and certain other private investment companies to establish and implement

anti-money laundering programs.  73 Fed. Reg. 65567, 65568, 65569 (Oct. 29, 2008). The

original proposals were issued in 2002 and 2003, and FinCEN said that, given the passage

of time, it has determined  that it will not proceed with these AML requirements without 

publishing new proposals.  FinCEN also noted that, in each case, these  entities' financial transactions must be conducted through other  financial institutions that are subject to AML requirements, and the  assets of their clients typically are carried with these financial

institutions.

The FinCEN announcement does not address its implications for broker-dealers who rely on investment advisers to perform elements of the broker-dealer's customer identification

program with respect to shared customers.  Under 31 CFR ' 103.122(b)(6), reliance on

another financial institution for this purpose requires that the other financial institution be

subject to an AML rule.  The Securities and Exchange Commission has issued a series of

no-action letters temporarily allowing reliance on investment advisers for this purpose, notwithstanding their lack of an AML requirement.  In the original request, the Securities

Industry Association asked that, if FinCEN  ultimately determined not to issue an AML rule

for advisers, broker-dealers be permitted to continue relying on advisers until  thirty days

after the public announcement of the decision. Securities  Industry Association

(Feb. 12, 2004).  The most recent extension of  the no-action relief does not refer to the

possibility of the proposed rule's withdrawal, but states that the no-action relief will be 

automatically withdrawn on the earlier of (1) the date upon which an  AML rule for advisers

becomes effective or (2) January 12, 2010. Securities Industry and

Financial Markets Association (Jan. 10, 2008)

The FinCEN withdrawals are available on the Federal Register web site, or at http://www.fincen.gov/statutes_regs/frn/

The SEC no-action letters are online at Spotlight on: Anti-Money Laundering Rules

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