US Legal Expert Warns Fund Managers Over Suspicious Activity Reporting

by Mike Godfrey, Tax-News.com, Washington

05 November 2002

Speaking at the recent MAR Bermuda Offshore Conference, New York-based investment law expert, and partner with the legal firm of Schulte Roth & Zabel LLP, Steven Fredman warned delegates that the US government may soon make suspicious transaction reporting mandatory for funds based in the United States, or dealing with US clients.

Currently, fund managers can file suspicious activity reports if they are concerned about the conduct of an investor, but this is a voluntary procedure. However, according to Mr Fredman, under the terms of the US Patriot Act and other new anti-money laundering legislation: 'The suspicious activity report will probably become mandatory.'

According to the Bermuda Sun newspaper, which reported last week on the conference, Mr Fredman advised delegates to ensure that their due diligence procedures are up to scratch, and pointed to a number of 'red flags' which could signal money laundering activity, including clients who are reluctant to answer questions, investors that regularly pull out of funds, regardless of the penalties, and inconsistencies between the originator of money invested, and the named fund investor.

He added that it is also important for fund managers to check the policies of third party administrators, suggesting that: 'It is incumbent upon the investment manager to get at least a description of anti-money laundering policies and if you accept the client, you accept these policies.'

Mr Fredman concluded by observing that some checks should also be made with regard to existing fund investors, although: 'Not to the same degree as a new investor'.

Recommended