In an article yesterday we discussed the withdrawal of proposed rules which would require hedge funds to implement anti-money laundering compliance programs (see Hedge Funds and AML Requirements). Yesterday Senator Carl Levin, a democrat from Michigan, released a statement condemning the withdrawal of proposed hedge fund AML rule by the Treasury. Senator Levin statement said, “The Administration’s five-year failure to extend anti-money laundering controls to hedge funds with offshore money – despite the hedge fund industry’s willingness to accept those controls – is inexplicable, ill-timed, and unwise.” Futher, Sentor Levin noted that Congress will face the issue in the future. “The absence of anti-money laundering controls on hedge funds is another regulatory gap that the Congress will have to tackle after the election.” The full statement, reprinted below, can be found here.
FOR IMMEDIATE RELEASE
November 3, 2008
Contact: Press Office
Statement of Senator Carl Levin on Treasury Withdrawal of Proposed Rule to Require Anti-Money Laundering Controls at Hedge Funds
Senator Carl Levin, Chairman of the U.S. Senate Permanent Subcommittee on Investigations, today released the following statement regarding anti-money laundering controls at hedge funds. Section 202 of S. 681, a 2007 bill Levin introduced to stop a wide range of offshore abuses, would require Treasury to issue a final rule requiring hedge funds to implement anti-money laundering controls.
“Last week, with no warning, the Bush Administration revoked a 2002 proposed rule to require hedge funds to install anti-money laundering controls. Hedge funds are unregulated financial companies that can handle millions of dollars in offshore money without any legal obligation to check who is behind the funds or report suspicious activities. A 2006 investigation by my Subcommittee showed how hedge funds can bring suspect offshore funds into the United States, highlighted the lack of hedge fund regulation, and recommended Treasury finalize its proposed anti-money laundering rule.
“But instead of plugging the hedge fund regulatory gap by issuing a final rule, the Administration went the opposite way, withdrew its anti-money laundering proposal, and offered nothing in its place. The Administration’s five-year failure to extend anti-money laundering controls to hedge funds with offshore money – despite the hedge fund industry’s willingness to accept those controls – is inexplicable, ill-timed, and unwise. The absence of anti-money laundering controls on hedge funds is another regulatory gap that the Congress will have to tackle after the election.”
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