ICI SUBMITS LETTER ON THE APPLICATION OF THE AML RULE FOR CORRESPONDENT ACCOUNTS TO FUND/SERV

©2006 Investment Company Institute. All rights reserved. Information may be abridged and therefore incomplete. Communications from the Institute do not constitute, and should not be considered a substitute for, legal advice. [19678] February 3, 2006 TO: AML COMPLIANCE WORKING GROUP No. 4-06 BANK AND TRUST ADVISORY COMMITTEE No. 4-06 BROKER/DEALER ADVISORY COMMITTEE No. 4-06 COMPLIANCE MEMBERS No. 8-06 OPERATIONS MEMBERS No. 2-06 SEC RULES MEMBERS No. 14-06 TRANSFER AGENT ADVISORY COMMITTEE No. 8-06 RE: ICI SUBMITS LETTER ON THE APPLICATION OF THE AML RULE FOR CORRESPONDENT ACCOUNTS TO FUND/SERV As you may know, the Financial Crimes Enforcement Network (“FinCEN”) adopted a rule in January relating to correspondent accounts for foreign financial institutions.1 The new rule requires every mutual fund, by April 4th, to establish a due diligence program reasonably designed to enable it to detect and report money laundering activity involving correspondent accounts established, maintained, administered, or managed for foreign financial institutions. The rule also requires mutual funds, by October 2nd, to subject all existing accounts to the new due diligence programs for correspondent accounts. Attached is a letter to FinCEN asking for concurrence in our interpretation of the new rule in the context of the National Securities Clearing Corporation’s Fund/SERV system. In the letter, we express our belief that the rule does not apply to a Fund/SERV account established, maintained, administered, or managed by a mutual fund for an NSCC member firm that is a U.S. financial institution, even if the NSCC member firm’s customer is a foreign financial institution. Given the April 4th implementation deadline for new accounts and the fundamental importance of Fund/SERV to the processing of purchases, redemptions, and exchanges of mutual fund shares, we have asked FinCEN to respond as soon as possible. Robert C. Grohowski Senior Counsel - International Affairs Attachment (in .pdf format) 1 31 C.F.R. 103.176. See also 71 Fed. Reg. 496 (January 4, 2006). 2 Note: Not all recipients receive the attachment. To obtain a copy of the attachment, please visit our members website (http://members.ici.org) and search for memo 19678, or call the ICI Library at (202) 326-8304 and request the attachment for memo 19678.