Private Investment Funds

In the United States, private investment funds (PIFs), whose gross assets are approximately $14 trillion, account for the majority of the sector globally. However these funds are subject to even weaker anti-money laundering checks than other financial sectors in the US.

This poses a grave threat. Trillions of dollars are invested in private investment funds (PIFs). In June 2020, the FBI reported “with high confidence” that these financial vehicles are being used by bad actors to circumvent the US regulatory system to commit fraud, money-laundering, and sanctions-evasion. According to the FBI’s own assessment, “criminally complicit investment fund managers likely will expand their money laundering operations as private placement opportunities increase.” Yet little is being done to correct the situation and prevent the further exploitation of these loopholes. As pointed out in a recent report by the Financial Action Task Force, the US regulatory environment for anti-money laundering (AML) “has some significant gaps, including minimal coverage of certain institutions and businesses,” including investment advisers.

The Anti-Corruption Data Collective seeks to leverage our investigative capacity to support reforms that address these risks in the US private investment fund sector, such as:

Finalize the 2015 FinCEN rule requiring investment advisers to establish effective AML programs. This effectively will remove the exception for PIF managers under current AML program requirements.

Require Investment Advisors (IAs) to report beneficial owners behind investments as well as the investment positions held by their funds.

Strengthening FINCEN capacity and resources for supervising implementation of the Bank Secrecy Act, allowing jointly scoped or executed PIF exams by FinCEN and the SEC.

Reduction of the minimum size requirement of funds that need to be self-reported to SEC (currently that minimum is set at $150,000,000).

While ACDC focuses on the US sector, it does so because the US sector is the primary target of global investment flows. Given the outsized role of the sector and the outsized level of financial secrecy in the US, it is the center of our current focus. This may change over time.