The US Treasury Department and the Securities and Exchange Commission (SEC) have unveiled new regulations aimed at safeguarding investment funds from being exploited for money laundering or terrorist financing activities.

AdvisorHub reports that US authorities are concerned about potential misuse by foreign entities to channel funds into the American financial system, the proposed rules would impact hedge funds, private equity, venture capital firms, and other money managers.

Under the proposed framework, firms would be mandated to gather comprehensive information on their investors, including personal details such as names, dates of birth, or entity formation dates, alongside addresses and other pertinent data. While the proposal marks a significant step towards bolstering regulatory oversight, the agencies have opened a 60-day public comment period, signaling that the finalization of the measures could take several months.

The Treasury Department has underscored the vulnerability of investment advisers as potential avenues for illicit financial activities, citing concerns related to tax evasion, terrorist financing, and corruption. Of particular concern are scenarios involving funds linked to Russian oligarchs or facilitating access to sensitive technology by Chinese authorities.

Despite some money managers already collecting customer identification details, a considerable number remain unable to verify the source of client funds, according to a recent Treasury report. Notably, the private funds industry, with assets totaling $20 trillion, faces limited anti-money laundering obligations under existing securities regulations.

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