Frequently Asked Questions: Suspicious Activity Reporting Requirements for Mutual Funds

Guidance
FIN-2006-G013
Issued: October 4, 2006
Subject: Frequently Asked Questions
Suspicious Activity Reporting Requirements for Mutual Funds The Financial Crimes Enforcement Network is issuing these frequently asked questions to clarify the suspicious activity reporting obligations of investment companies pursuant to the applicable Bank Secrecy Act regulation located at 31 C.F.R. § 103.15 (“Reports by mutual funds of suspicious transactions”).1 This regulation is applicable to investment companies (as defined in section 3 of the Investment Company Act of 1940 (the “1940 Act”)) that are open-end investment companies (as defined in section 5 of the 1940 Act) and that are registered, or required to register, with the U.S. Securities and Exchange Commission (SEC). For purposes of this regulation, these investment companies are referred to as “mutual funds.” These frequently asked questions are being issued following consultation with the staff of the SEC. While the purpose of this document is to provide interpretive guidance with respect to the suspicious activity reporting requirements applicable to mutual funds, we recognize that it does not answer every question that may arise in connection with the applicable regulation. Mutual funds are encouraged to use the basic principles set forth in the rule, as articulated in these frequently asked questions, to address variations on these questions that may arise. Mutual funds are expected to implement their suspicious activity reporting program in accordance with the nature of their business. We note that the suspicious activity reporting requirement, while important, is only one
part of a mutual fund’s Bank Secrecy Act compliance program and adequate observation
of this requirement, standing alone, will not be sufficient to meet a mutual fund’s other obligations under the Bank Secrecy Act. Moreover, these frequently asked questions are designed solely to help mutual funds comply with their suspicious activity reporting requirements, and they do not address the applicability of any other Federal or state laws.