ACTION REQUESTED
[15705]
February 28, 2003
TO: BROKER/DEALER ADVISORY COMMITTEE No. 9-03
MONEY LAUNDERING RULES WORKING GROUP No. 16-03
TAX COMMITTEE No. 10-03
TRANSFER AGENT ADVISORY COMMITTEE No. 24-03
RE: DRAFT INSTITUTE LETTER ON MUTUAL FUND SUSPICIOUS ACTIVITY
REPORTING RULE
The Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) has
proposed a rule relating to the filing of suspicious activity reports (SARs) by mutual funds anti-
money laundering programs for unregistered investment companies.1 Attached for your review
is a draft of the Institute’s comment letter on the proposal.
The draft letter makes three principal comments:
• First, the letter addresses the standard for determining what constitutes a
suspicious transaction. The draft letter urges Treasury to recognize that mutual
funds have less information available to them in making SAR determinations
than other types of financial institutions and that the mutual fund SAR rule is
intended to take this operating reality into account. The letter then recommends
that Treasury clarify that mutual funds are expected to file SARs based on the
information obtained by the fund, its underwriter, or its transfer agent in the
normal course of establishing a shareholder relationship or processing
transactions.
• Second, the letter addresses the joint filing of SARs by mutual funds and their
service providers. In this regard, the letter requests that Treasury clarify that its
references in the proposal to broker-dealers include all types of broker-dealers,
whether they act as principal underwriters or in any other capacity, such as
selling fund shares to the public. The letter also strongly recommends that
Treasury clarify the scope of an exception from the non-disclosure provisions of
the proposed rule and expressly provide, preferably in the final rule text, that the
sharing of information among financial institutions in order to facilitate the filing
1 See Financial Crimes Enforcement Network; “Amendment to the Bank Secrecy Act Regulations – Requirement that
Mutual Funds Report Suspicious Transactions,” 68 Fed. Reg. 2716 (January 21, 2003).
2
of SARs on behalf of more than one entity would not violate those non-disclosure
provisions.
• Finally, the letter addresses the interplay between the SAR regime and the
reporting of cash transactions to the Internal Revenue Service on Form 8300. As
explained in the letter, some funds may be required to file two separate reports
on transactions involving cash equivalents – one to Treasury and one to the IRS.
The draft letter expresses the view that this duplicative reporting would serve no
valid law enforcement or public policy purpose, and strongly recommends that
mutual funds and/or their transfer agents not be required to report transactions
involving cash equivalents on Form 8300. The letter provides two alternative
ways to accomplish this goal.
The letter must be submitted to FinCEN by March 24th. We have scheduled a
conference call to discuss the Institute’s draft comment letter on Tuesday, March 18th
at 3:00 p.m. Eastern time. (A subsequent memorandum will provide details on how
to join the call.) We also would encourage you to provide any comments on the
attached draft prior to the conference call by contacting me by phone at (202) 371-
5430 or by email at rcg@ici.org.
Robert C. Grohowski
Associate Counsel
Attachment (in .pdf format)