{"id":37996,"date":"2016-03-31T19:26:17","date_gmt":"2016-04-01T00:26:17","guid":{"rendered":"https:\/\/content.findlaw-admin.com\/ability-legal\/uncategorized\/venture-capital-funds-need-to-focus-on-anti-money-laundering.html"},"modified":"2016-08-03T18:03:34","modified_gmt":"2016-08-03T23:03:34","slug":"venture-capital-funds-need-to-focus-on-anti-money-laundering","status":"publish","type":"corporate","link":"https:\/\/corporate.findlaw.com\/litigation-disputes\/venture-capital-funds-need-to-focus-on-anti-money-laundering.html","title":{"rendered":"Venture Capital and Money Laundering"},"content":{"rendered":"
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Venture capital (VC) firms are higher risk enterprises that can present unique challenges for attorneys. From speculative investments to the misuse of investor funds<\/a>, counsel for VC firms or their investors must be ever vigilant in protecting their clients. Because of the high risks involved, it’s important to ensure that your clients aren’t running afoul of the law. Nowhere is this more true than with money laundering, an ever-growing concern in an age of global finance and free-flowing capital.<\/p>\n

In 2015, for example, a risk assessment<\/a> from the Treasury Department estimated that around $300 billion is generated each year from illicit proceeds which can then be funneled through laundering operations to finance organized crime or terrorist networks<\/a>. Although VC investments tend to be long-term and illiquid, they can still be used to shelter illicit funds or as part of a broader scheme to fund illicit ventures. Given the risks associated with venture capital funds and money laundering, it’s important to ensure that your clients understand their potential obligations under anti-money laundering (AML) laws.<\/p>\n

Anti-Money Laundering Laws<\/b><\/p>\n

In 1970, Congress passed the Bank Secrecy Act<\/a> (BSA) which created the basic framework for federal AML laws. It required financial institutions to maintain records and reports on suspected money laundering transactions. The BSA was further strengthened by the Patriot Act<\/a> passed shortly after the September 11, 2001 attacks. Among other provisions of the Act, Section 326 required financial institutions to establish programs to identify and verify customers. In addition, Section 352 of the Act required every financial institution to develop and implement AML programs<\/a> which, at a minimum, would include the:<\/p>\n