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Hedge Funds Risk Biden-Era End to Money-Laundering Loophole

  • Private fund managers had been targeted under 2015 draft rule
  • Proposal sought same source-of-cash disclosures as banks
US-HEALTH-VIRUS-OPEN

Photographer: Angela Weiss/AFP/Getty Images

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Private-equity and hedge funds face an increased risk that the U.S. will close a longstanding money-laundering loophole for assets they manage. All it would take is the Biden administration to quickly revive a rule that was developed during Barack Obama’s term but left unused by Donald Trump.

The U.S. has intensified its crackdown on dirty money in recent years, requiring banks, brokerages and mutual funds to monitor clients and report suspicious activity. But investment advisers overseeing trillions of dollars in private equity and hedge funds are exempt from such rules, and the Federal Bureau of Investigation says that’s attracted more cash from Mexican drug lords, countries under U.S. sanctions and companies with suspected Russian mob ties.