An AI-powered platform called Napier AI recently examined the FCC laws that affect the wealth and asset management industry and what businesses should know about them. Napier AI is intended to enhance AML defenses and compliance capabilities.

The price of breaking regulations is become more and more expensive, both monetarily and in terms of the possible harm to a company's reputation. Thus, now more than ever, a strong anti-money laundering and counter-terrorist financing (AML/CTF) program is essential.

increased scrutiny of regulations in the US

In an effort to strengthen AML initiatives, the US Treasury Department's Financial Crimes Enforcement Network (FinCEN) released a proposal in February 2024. This new rule requires "investment advisors" to set up official AML plans. This includes exempt reporting advisors (ERAs) including those registered with the Securities and Exchange Commission (SEC).

This plan lists a number of prerequisites, such as putting in place an extensive AML/CFT program that includes hiring a specific AML compliance officer, holding internal training sessions, and going through frequent testing. Firms would also have to adhere with record-keeping requirements, including the Recordkeeping and Travel Rule, and file Suspicious Activity Reports (SARs) to alert FinCEN to possible money laundering operations.

This rule will initially only apply to advisors that manage $25 million or more in assets, but it might eventually also apply to smaller, state-regulated firms. The implementation of a Customer Identification Program (CIP), intended to improve businesses' capacities to identify clients and stop money laundering, is a noteworthy issue for future regulation.

Worldwide Regulatory Advancements

There are other nations enforcing stricter regulations than the United States. In a "Dear CEO letter" published in March 2024, the Financial Conduct Authority (FCA) of the United Kingdom emphasized the need for better funding and management of financial crime measures. The letter highlights differences between the actions of registered firms and their real-world procedures, which may aid in the laundering of money.

In a similar vein, guidelines for determining the sources of clients' assets and wealth have been made available by Austrac, the Australian Transaction Reports and Analysis Centre. This is a component of its duties related to client due diligence, with an emphasis on accurately and promptly reporting any suspicious transactions, as stated in its 2024 priorities.

Consequences for Asset and Wealth Managers

The US plan is a big step in the right direction for improving AML operations, protecting consumer assets, and giving law enforcement the tools they need to fight crime. This program is a reflection of a global movement to guarantee that financial institutions carry out sufficient due diligence and swiftly report any suspicious activity, protecting the integrity of the global financial system.

According to Napier AI, implementing strict AML controls provides a competitive advantage that goes beyond mere regulatory compliance. Leveling the playing field and reducing the danger of financial crime are important goals for wealth and asset managers, who also hope to support the stability and security of international economies.