To Whom It May Concern:

My name is Jennifer Schulp, and I am the director of financial regulation studies at the Cato Institute’s Center for Monetary and Financial Alternatives. I appreciate the opportunity to comment on the Financial Crimes Enforcement Network’s (FinCEN) proposed rule addressing “Anti‐​Money Laundering/​Countering the Financing of Terrorism and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers,” which seeks to include “certain investment advisers in the definition of ‘financial institution’ under the Bank Secrecy Act (BSA), prescribe minimum standards for anti‐​money laundering/​countering the financing of terrorism (AML/CFT) programs to be established by covered investment advisers, [and] require covered investment advisers to report suspicious activity to FinCEN pursuant to the BSA,” among other things.

The Cato Institute is a public policy research organization dedicated to the principles of individual liberty, limited government, free markets, and peace, and the Center for Monetary and Financial Alternatives focuses on identifying, studying, and promoting alternatives to centralized, bureaucratic, and discretionary financial regulatory systems. The opinions I express here are my own.

FinCEN’s characterization of this proposal as aiming to “close [a] gap” in AML/CFT obligations is inapt. Investment advisers do not provide services that are akin to those provided by covered financial institutions, and, because they do not have custody of client assets, investment advisers do not provide a “access” into the U.S. financial system. Moreover, the significant costs of this proposal are not outweighed by its marginal benefits, particularly in light of a lack of evidence that an ever‐​expanding pool of suspicious activity reporting plays any significant role in minimizing illicit activity.3 FinCEN should withdraw this proposed rule.