RC: Could you provide an overview of the current scrutiny private equity and hedge funds are under in connection with FCPA, AML and OFAC regulations? Are fund managers now spending more time and resources on reducing risks and exposures in these areas?

Kelly: FCPA and OFAC regulations apply to entities conducting business in or through US means. Anti-money laundering (AML) rules and regulations are promulgated under Section III of the USA PATRIOT Act. With the passage of Dodd-Frank, many hedge funds are required to register as registered investment advisers (RIAs) under the Investment Advisors Act of 1940. Though there is no clear regulatory requirement to do so, RIAs are covered under the criminal provisions of the Money Laundering Control Act. Today, many RIAs have developed internal policies and procedures to address exposure to AML, FCPA and OFAC due to tightened scrutiny into transactions by financial institutions.

Walker: In 2016, the US Justice Department increased the size of its FCPA unit by 50 percent and announced a pilot programme that provides guidance for corporate resolutions of FCPA investigations that strongly encourages self-disclosure, cooperation, and remediation (where appropriate). The pilot programme demonstrates the government’s commitment to FCPA enforcement and has motivated private equity and hedge funds to enhance their anticorruption compliance programmes. Funds also have a clear directive to implement comprehensive internal controls to achieve AML and OFAC compliance in the wake of FinCEN’s 2015 announcement of a proposed rule that will bring SEC registered investment advisers under the Bank Secrecy Act and USA PATRIOT Act for purposes of AML compliance. RIAs will be required to implement a comprehensive written compliance programme designed to prevent money laundering and terrorist financing.

Oct-Dec 2016 Issue


Richards Kibbe & Orbe LLP


York Capital Management LP