US Treasury Extends Anti-Laundering Laws

by Carla Johnson, Investors Offshore.com

20 September 2002

The US Treasury Department on Wednesday issued new rules extending anti-money laundering obligations to a wider range of businesses under the umbrella of the USA Patriot Act.

Earlier versions of some of the rules applying to casinos, banks, and securities brokers were put forward in April. However, the legislative changes with regard to hedge funds and life insurance companies were introduced for the first time on Wednesday, and must now undergo a review process.

New provisions included in the rules will oblige banks to report runs of transactions just under the $10,000 benchmark, allow financial institutions to share information about money laundering investigations with each other, and prevent US banks and brokers from providing accounts to foreign 'shell banks', which do not have a physical presence in any country.

Under the new regulations, casinos with gross annual revenues of over $1 million will be obliged to file 'suspicious activity reports' on large transactions, insurance companies will need to develop procedures for spotting possible money laundering activity, and hedge funds based in the United States, or with US investors must report suspicious transactions and/or clients.

Speaking to the Washington Post following the release of the new rules, Treasury General Counsel, David Aufhauser announced that: 'It was important to extend the rules to hedge funds in particular. They're such a large unregulated flow of money.'

However, the hedge fund industry appears philosophical about the changes, clearly regarding them as necessary given the changed international investment environment.

Also speaking to the Washington Post, John G. Gaine, President of the Managed Funds Association confirmed this, explaining that: 'We've been very cooperative with Treasury'.

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