FinCEN and the SEC have proposed a new rule targeting money laundering and terrorist financing. The rule would require certain investment advisers to establish customer identification programs to prevent criminals from exploiting the U.S. financial system for illicit purposes. Here’s our breakdown and what it means for talent attraction.
Scope of the Proposed Rule
The proposed CIP requirements would apply to investment advisers registered with the SEC (RIAs) and those exempt from registration under specific provisions of the Investment Advisers Act (ERAs). The rule aligns with existing CIP requirements for other financial institutions, such as broker-dealers and mutual funds.
Key Elements of the Proposed CIP
Under the proposed rule, investment advisers must establish, document, and maintain a written CIP appropriate for their size and business. The CIP must include:
- Risk-based procedures for verifying customer identities.
- Keeping records.
- Consulting government lists of known or suspected terrorists.
Exemptions and Flexibility
The proposed rule allows investment advisers to deem CIP requirements satisfied for mutual fund customers implementing a compliant CIP and to rely on other financial institutions to perform CIP procedures under certain conditions.
Compliance Timeline and Costs
If adopted, investment advisers would have six months from the effective date to develop and implement a compliant CIP. The SEC and FinCEN estimate an average total cost of $2,327 for exempt reporting advisers and $30,572 for registered investment advisers to comply with the proposed rule.
What Jobs Would be Affected?
The proposed rule will impact several job roles within the financial services industry, particularly compliance, risk management, and operations. Some specific positions that may be affected include:
1. Chief Compliance Officer (CCO): CCOs will oversee the development, implementation, and ongoing management of the CIP, ensuring it meets the requirements outlined in the proposed rule.
2. AML Compliance Specialist: These professionals will play a crucial role in designing and implementing the CIP and monitoring and reporting on its effectiveness. They may also be responsible for conducting customer due diligence and risk assessments.
3. Customer Onboarding Specialist: Staff involved in the customer onboarding process will need to be trained on the new CIP requirements and responsible for collecting and verifying customer identification information by the program.
4. Operations Manager: Operations managers must ensure the CIP is integrated into the organization’s existing processes and systems, such as account opening procedures and recordkeeping.
5. IT and Data Management Professionals: IT staff may be involved in developing or updating systems to support the CIP, such as customer identity verification tools and databases for storing and retrieving customer information.
6. Internal Auditor: Internal auditors will be responsible for assessing the effectiveness of the CIP and ensuring that it is being implemented and maintained by the proposed rule and the organization’s policies and procedures.
7. Training and Development Manager: These professionals will develop and deliver training programs to ensure that all relevant staff are aware of the CIP requirements and their roles in implementing and maintaining the program.
Recruitment and Talent Acquisition Questions
1. Will the proposed rule require additional compliance staff or specific organizational skill sets?
2. How can we attract and retain talent with the necessary expertise to implement and maintain a compliant CIP?
3. What training and professional development opportunities should be provided to existing staff to ensure they are equipped to handle the new requirements?
