US Hedge Fund Industry Unveils New Anti-Money Laundering Rules

by Mike Godfrey, Tax-News.com, London

09 April 2002

The US hedge fund industry unveiled new guidelines on Friday designed to ensure that terrorist and criminal funds are not laundered through the sector, which has traditionally been relatively loosely regulated as the funds are only available to qualified and institutional investors.

The Managed Funds Association, which represents and lobbies for the United States' $550 billion hedge fund industry has sent guidelines on complying with the government's tough new anti-money laundering laws to each of its 650 members.

The new voluntary rules, which were hammered out by the MFA after consultations with individual hedge funds, lawyers, and government officials, are designed to ensure that hedge funds are aware of, and can verify the identity of their investors.

The MFA also suggests the appointment of a compliance officer for each fund. These officials would not manage money directly, but would monitor how it got to the fund, the Association said on Friday.

'We want to show the world that the hedge fund industry has an intense interest in doing the right thing and is serious about rooting out money laundering,' explained John Gaine, the President of the Washington based industry group.

Although there are concerns that the new guidelines are too strict, and will put off managers and potential clients, the MFA has stressed that the initiative is not a 'witch hunt', and that the new rules should not stem the tide of interest from legitimate investors.

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