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PUBLICATIONS

APR.30.2002

Anti-Money Laundering & the USA Patriot Act

By Shartsis Friese Investment Funds and Advisers

On April 2, 2002, we sent a letter to you about the USA PATRIOT Act. The letter noted that compliance with the PATRIOT Act was required by April 24, 2002, which was also the date the Treasury Department was supposed to release related regulations. The letter also included a sample anti-money laundering policy that you could use in the interim as a good faith effort to comply with the PATRIOT Act.

On April 23, 2002, the Treasury Department released new regulations relating to the PATRIOT Act that are applicable to, among others, mutual funds and securities brokers and dealers registered with the SEC. The Treasury Department also exercised its authority to defer, for a period of not more than six months, application of the PATRIOT Act’s anti-money laundering requirements to other “financial institutions” (including hedge funds, venture capital funds, commodity pool operators and commodity trading advisors) in order to review and analyze those institutions and develop regulations that are appropriate for them. Accordingly, unregistered funds (such as hedge funds and venture capital funds) will have additional time (perhaps up to six months) to adopt their anti-money laundering programs.

As noted in our prior letter to you, the PATRIOT Act does not explicitly define the term “investment company” and it is unclear if companies specifically excluded from the definition of “investment company”, such as hedge funds and venture capital funds, are covered by the PATRIOT Act. The Treasury Department notes, however, in its April 23 release, that it is likely that such entities will be required to establish anti-money laundering programs. The Treasury Department did not indicate whether it will expand the definition of “financial institutions” to include investment advisers.

We will keep you informed of developments regarding the PATRIOT Act. If you have any questions regarding this matter, please contact Douglas Hammer, John Broadhurst, Carolyn Gorman, Christopher Rupright, Carolyn Reiser, Joan Grant, Ellyn Roberts, Neil Koren, Anthony Caldwell, or James Frolik.

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