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Money-Laundering Shield Proposed for Mutual Funds

The recommendation is aimed at choking off funds to those who back terrorism.

January 01, 2003|From Times Wire Services

WASHINGTON — The U.S. Treasury on Tuesday recommended that mutual funds be required to report suspicious transactions as part of new measures against money-laundering put in place after the Sept. 11 terrorist attacks.

The change could bring mutual funds, which have about $7 trillion in assets and are among the most popular U.S. investment vehicles, more into line with banks and financial services firms, which already must file such reports.

The recommendation came in a report to Congress on implementing new laws aimed at choking off funds for terrorist activity. The Treasury also urged that unregistered investment companies, such as hedge funds and real estate investment trusts, establish customer identification and verification programs.

President Bush last year signed into law the USA Patriot Act, which requires financial services companies to strengthen oversight of customer activity as part of anti-terrorism efforts. Much of the law is aimed at catching and deterring money launderers and those who back terrorism.

Mutual funds already are subject to a range of new reporting requirements under the new law.

A draft of the recommendation is being written and could be offered soon, according to a Treasury Department official who said the proposal would be similar to rules for banks and other financial companies.

Although the Treasury has put in place many of the rules implementing the law, some areas have become snagged over concerns expressed by financial institutions. The government has announced delays in rules aimed at preventing ties to offshore "shell banks" and standards for verifying customer identity.

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