Bringing you live news and features since 2006 

Hedgeweek Comment: New president, new hedge fund rules?

RELATED TOPICS​

Last week the US Treasury Department formally dropped its proposals for anti-money laundering regulations governing the hedge fund industry.

Last week the US Treasury Department formally dropped its proposals for anti-money laundering regulations governing the hedge fund industry. This was partly because of the difficulties in enforcing such a system on an unregulated industry with no oversight body in place to do so, but also because Treasury experts say that hedge funds are an unlikely choice of vehicle for money laundering or terrorist financing because of their risk profile and relative lack of liquidity.

However, the situation could quickly change once new president Barack Obama is installed, according to Senator Carl Levin, who describes the decision as ‘inexplicable, ill-timed and unwise’. He says: ‘The absence of anti-money laundering controls on hedge funds is another regulatory gap that the Congress will have to tackle after the election.’

Early last year Obama joined fellow senators Levin and Norm Coleman in introducing legislation that would have required hedge funds to establish anti-money laundering programmes under the supervision of the Treasury Department and also sought to curb abuse of offshore tax havens and tax shelters.

The proposed Stop Tax Haven Abuse Act, a strengthened version of a tax reform bill introduced by Levin, Coleman, and Obama in the previous Congress, also failed to make it into law. But with Obama in the White House and the Democrats with a strengthened grip on Congress, third time might well prove unlucky for hedge funds and other members of the offshore financial services industry.

‘Hedge funds are unregulated financial companies that can handle millions of dollars in offshore money without any legal obligation to check who is behind the funds or report suspicious activities,’ Levin says, incorrectly, since funds domiciled in jurisdictions such as the Cayman Islands or British Virgin Islands are required to run due diligence checks on their investors that are often more stringent than the requirements in the US.

‘But instead of plugging the hedge fund regulatory gap by issuing a final rule, the administration went the opposite way, withdrew its anti-money laundering proposal, and offered nothing in its place.’

Not everyone in the Democratic Party believes this. Barney Frank, chairman of the House of Representatives’ financial services committee, notes that many financial institutions have been overburdened by anti-money laundering regulations and excessive reporting requirements. But hedge fund managers can expect the new president at the very least to revisit the Treasury decision.

Latest News

MerQube has announced the appointment of Dave Mueller as Chief Financial Officer. Mueller brings 17 years experience operating in corporate..
Northern Trust Asset Management (NTAM), has announced that David Abner is joining as Head of Global ETFs and Funds...
Nvidia’s market cap surge to more than USD3 trillion making it the second most valuable company in the world almost..
BlackRock writes that May marked the highest inflow month of the year for both rates and high yield (HY) ETPs,..

Related Articles

Darren Johnson, Komainu
Custody specialist, Komainu, was launched in 2018 as a joint venture between Nomura, digital-asset investment manager, CoinShares and blockchain business,...
Stuart Chaussee
In January this year, global data and business intelligence platform, Statista reported that there are now more than 8000 ETFs...
Ethereum coin
Last week saw Australia launch spot bitcoin ETFs, with Matteo Greco, Research Analyst at Fineqia International, writing that Monochrome Asset...
Timothy Rotolo, Range Funds
In 2023, Timothy Rotolo launched his business, Range Fund Holdings, the parent company for Range Indices and Range ETFs, followed...
Subscribe to the ETF Express newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by