Two Democratic senators called on financial regulators to close a two-decade-old loophole that could prevent hedge funds, private equity firms and other private funds from having to perform basic know-your-customer and anti-money laundering checks.
In letters sent Tuesday to top officials at the Treasury Department and the Securities and Exchange Commission, Massachusetts Senator Elizabeth Warren and Rhode Island Senator Sheldon Whitehouse said there was no point in exempting private investment funds from conducting the same basic customer background checks. that banks, brokers, mutual funds and casinos should do.
That exemption would complicate efforts to find the US assets of Russian oligarchs who are the subject of sanctions as a result of the war in Ukraine.
In their letter to Treasury Secretary Janet Yellen and SEC chair Gary Gensler, the senators said closing the loophole “would help the U.S. government track down the hidden wealth of sanctioned Russian elites and of money, terrorism, the proliferation of weapons of mass destruction and other criminal activities.”
US authorities sometimes struggle to track down offshore money because fund managers are not subject to the Bank Secrecy Act, which requires most regulated financial institutions to carefully monitor their clients and potentially stop money laundering.
Ms Warren and Mr Whitehouse suggested that the Treasury could interpret the additional powers given to financial regulators in the wake of the September 11 terror attacks as covering private funds.
But there are other possible approaches. One of these is to amend the Banking Secrecy Act to include investment advisers and others. And other proponents of increased oversight say the Investment Advisers Act gives the SEC the power to require private funds to conduct know-your-customer checks.
The assets of rich and powerful Russians have come under intense scrutiny after the United States and other Western countries focused on their ability to do business after the invasion of Ukraine.
According to a report by DailyExpertNews. (While the UK government has imposed sanctions on Mr Abramovich, the United States has not.)
In another example, Fort Ross Ventures, a California venture capital firm, has taken investment dollars from Sberbank, a Russian state-owned bank subject to sanctions by the US and UK governments.
But in general, private funds in the United States are largely silent about whether they have money from Russian sources.