AML Best Practices For Private Funds: Red Flags And Responses For Private Funds

U.S. hedge funds, private equity funds, and venture capital funds (collectively, the Private Funds)² and their U.S. general partners, sponsors, and managers (Advisers) are not directly subject to the Bank Secrecy Act of 1970 and its amendments (BSA), as previously discussed in Lowenstein Sandler's client alert, "Anti-Money Laundering Best Practices for Private Fund Managers: The Prudence of Establishing an AML Compliance Program," dated February 17, 2023. Advisers are encouraged to implement a risk-based anti-money laundering (AML) compliance program similar to those implemented by financial institutions and with whom the Advisers and Private Funds engage with on a regular basis for multiple transactions (e.g., custody, loan, trading, banking, and other activities). An Adviser's implementation of a risk-based AML compliance program is considered a good business practice and aligns with standard industry practices.