Tag Archives: David Sewell

FinCEN Adopts Rule Extending AML/CFT Requirements to RIAs and ERAs, Further Increasing Regulatory Obligations on Investment Advisers

Photos of authors

Left to Right: David Sewell, Timothy Clark, Ivet Bell, David Nicolardi, and Nathaniel Balk (photos courtesy of authors)

On August 28, 2024, the Financial Crimes Enforcement Network (FinCEN)  adopted a final rule that extends anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to certain types of investment advisers (the Final Rule), and delegates to the U.S. Securities and Exchange Commission (SEC) the authority to examine investment advisers’ compliance with these obligations.[1] The Final Rule ends a long-running debate over whether to subject investment advisers to AML/CFT obligations after multiple prior proposals to do so had stalled. 

The Final Rule imports standards and requirements that will be familiar to investment advisers affiliated with financial institutions already subject to AML/CFT obligations, but may be new to  smaller and independent investment advisers.  For these entities, the compliance uplift required could be substantial.

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FinCEN Proposes Comprehensive Updates to AML/CFT Program Rules

by David Sewell and Nathaniel Balk

photos of the authors

From left to right: David Sewell and Nathaniel Balk. (Photos courtesy of Freshfields Bruckhaus Deringer LLP)

On June 28, 2024, the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule (the Proposed Rule) to update anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to reflect revisions to the Bank Secrecy Act (BSA) contained in the Anti-Money Laundering Act of 2020 (AML Act).[1]

FinCEN’s release marks the latest step in the ongoing implementation of the AML Act, which adopted the most significant revisions to the U.S. AML/CFT framework since the adoption of the USA PATRIOT Act in 2001. Although the Proposed Rule in large part clarifies, streamlines, and updates existing regulations, it includes several provisions that materially change AML/CFT compliance obligations for many financial institutions, including most notably a mandatory risk assessment process.

Below, we briefly summarize the Proposed Rule, including its scope, requirements, and potential implications, and highlight open questions and next steps.  

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Treasury and FSOC Sharpen Focus on Risks of AI in the Financial Sector

by Alison M. Hashmall, David Sewell, Beth George, Andrew Dockham, Megan M. Kayo and Nathaniel Balk

Photos of the authors

Top left to right: Alison M. Hashmall, David Sewell and Beth George. Bottom Left to Right: Andrew Dockham, Megan M. Kayo and Nathaniel Balk. (Photos courtesy of Freshfields Bruckhaus Deringer LLP)

On June 6-7, 2024, the Financial Stability Oversight Council (FSOC or the Council) cosponsored a conference on AI and financial stability with the Brookings Institution (the FSOC Conference).  The conference was billed as “an opportunity for the public and private sectors to convene to discuss potential systemic risks posed by AI in financial services, to explore the balance between encouraging innovation and mitigating risks, and to share insights on effective oversight of AI-related risks to financial stability.” The FSOC Conference featured noteworthy speeches by Secretary of the Treasury Janet Yellen (who chairs the Council), as well as Acting Comptroller of the Currency Michael Hsu.  And in a further sign of increased regulatory focus on AI in the financial industry, the Treasury Department also released a request for information on the Uses, Opportunities, and Risk of Artificial Intelligence (AI) in the Financial Services Sector (the AI RFI) while the conference was happening – its most recent, and most comprehensive, effort to understand how AI is being used in the financial industry.

In this blog post, we first summarize the key questions raised and topics addressed in the AI RFI.  We then summarize the key takeaways from FSOC’s conference on AI and discuss how these developments fit within the broader context of actions taken by the federal financial regulators in the AI space. Lastly, we lay out takeaways and the path ahead for financial institutions as they continue to navigate the rapid development of AI technology.

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With The Fintech Sector’s Return to Explosive Growth, Here Are Top U.S. Legal Issues to Watch

by Jamillia Ferris, Vinita Kailasanath, Christine Lyon, Jan Rybnicek, and David Sewell

Left to right: Jamillia Ferris, Vinita Kailasanath, Christine Lyon, Jan Rybnicek, and David Sewell (photos courtesy of Freshfields Bruckhaus Deringer LLP)

Freshfields recently hosted a U.S. Fintech Hot Topics Webinar to highlight on-the-ground insights from our Antitrust and Competition, Data Privacy and Security, Financial Services Regulatory, and Transactional teams. The fintech sector has recently seen a return to explosive growth and is expected to continue growing rapidly notwithstanding regulatory and economic headwinds. Our top takeaways from the panel discussion are below, and the full recording is available here.

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FinCEN Proposes Highly Anticipated Investment Adviser AML/CFT Rule

by David Sewell, Timothy Clark, Stephanie Brown-Cripps, Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang

Photos of authors

Top (left to right): David Sewell, Timothy Clark, and Stephanie Brown-Cripps
Bottom (left to right): Nathaniel Balk, Nathalie Kupfer, and Rosie Jiang
(Photos courtesy of Freshfields Bruckhaus Deringer LLP)

On February 13, 2024, the U.S Treasury Department’s Financial Crimes Enforcement Network (FinCEN) issued a proposed rule to extend anti-money laundering (AML) and countering the financing of terrorism (CFT) compliance obligations to certain types of investment advisers operating in the United States (Proposed Rule).[1]  The agency simultaneously released a “2024 Investment Adviser Risk Assessment” (Risk Assessment), its first comprehensive effort to describe and measure “illicit finance threats involving investment advisers.”[2]

FinCEN’s release marks the latest development in a decades-old debate about whether investment advisers should be subject to the Bank Secrecy Act (BSA) and the attendant AML/CFT requirements that have long been applied to banks, broker-dealers, and other financial institutions.  If adopted in the current (or a similar) form, the Proposed Rule would bring this long-running debate to a close once and for all.  

Below, we briefly summarize the Proposed Rule, including its scope, requirements and potential implications, and highlight open questions and next steps.  

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AMLA 2020: New Penalties for Concealing Transactions Involving Senior Foreign Political Figures

by Barak Cohen, David B. Massey, Jamie A. Schafer, David Sewell, and Paul M. Korol

On New Year’s Day 2021, Congress passed the Anti-Money Laundering Act of 2020 (AMLA 2020). The AMLA 2020 included sweeping reforms aimed at strengthening protections against money laundering, terrorism financing, and other illegal activities.

In this article, we examine two new criminal penalties established by the AMLA 2020. In a nutshell, these penalties prohibit concealing or falsifying information related to ownership or control of funds in transactions involving senior foreign political figures and entities designated to be of primary money laundering concern. This is a potentially significant new tool providing for criminal prosecution targeting a broad swath of intermediaries who may be involved in facilitating transactions involving senior foreign political officials, including brokers, nominees, lawyers and any other person or entity that may communicate with a financial institution in the course of a transaction falling under these provisions.

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The Anti-Money Laundering Act of 2020: The Remarkable Expansion of the U.S. Government’s Subpoena Power Over Foreign Financial Institutions

by Barak Cohen, David B. Massey, Jamie A. Schafer, David Sewell, and Bria M. Cochran

On New Year’s Day 2021, Congress passed the Anti-Money Laundering Act of 2020 (AMLA 2020), which included sweeping reforms aimed at strengthening protections against money laundering, terrorism financing, and other illegal activities. In this post, we examine the AMLA 2020’s remarkable expansion of the U.S. Departments of Justice and Treasury’s subpoena authority over foreign financial institutions, which has significant implications for foreign financial institutions maintaining U.S. correspondent accounts Continue reading →