NVCA Responds to Treasury’s New AML Final Rule 

WASHINGTON, D.C. – National Venture Capital Association (NVCA) President and CEO Bobby Franklin issued the following statement in response to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network’s (FinCEN) Final Rule being published today in the Federal Register. 

Despite the narrower definition of ‘investment advisors’ under the final rule, NVCA is disappointed by FinCEN’s decision to place new compliance burdens on both Registered Investment Advisors (RIAs) and Exempt Reporting Advisors (ERAs).  

“While we share FinCEN’s goal of addressing money laundering, this rule reveals a misunderstanding of the role of venture capital investments in startups and disregards the illiquid nature of the venture industry.  LPs and other investors transfer funds to VCs from financial institutions that are already subject to strict anti-money laundering regulations. Private fund managers will now face duplicative and unnecessary compliance burdens, which will impact their funds and portfolio companies. We especially worry about the capacity of ERAs, who currently are not subject to these regulations and have limited resources to implement these programs.” 

The new anti-money laundering (AML)/ counter-terrorist financing (CFT) requirements include registered investment advisers (RIAs), and exempt reporting advisers (ERAs) as covered “investment advisors,” but FinCEN narrowed the final rule’s definition to exclude: 

• State registered advisers
• SEC-registered advisers that do not report any assets under management on Form ADV
• Advisers that are registered with the SEC solely because they are mid-sized advisers, multi-state advisers, or pension consultants
• Advisers that qualify for the foreign private adviser exemption
• Family offices that are not required to register with the SEC

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The National Venture Capital Association (NVCA) empowers the next generation of American companies that will fuel the economy of tomorrow. As the voice of the U.S. venture capital and startup community, NVCA advocates for public policy that supports the American entrepreneurial ecosystem. Serving the venture community as the preeminent trade association, NVCA arms the venture community for success, serving as the leading resource for venture capital data, practical education, peer-led initiatives, and networking. For more information about NVCA, please visit www.nvca.org.