Pubdate: Wed, 01 Jan 2003 Source: San Antonio Express-News (TX) Copyright: 2003 San Antonio Express-News Contact: http://www.mysanantonio.com/expressnews/ Details: http://www.mapinc.org/media/384 Author: Jeannine Aversa, Associated Press FEDS MAY TAP INTO MUTUAL FUND FIRMS' INFO WASHINGTON - Mutual fund companies would have to file reports on suspicious financial transactions as part of an effort to catch drug dealers, terrorists and others who launder money, federal regulators recommended Tuesday.If implemented, the recommendation by the Treasury Department, the Securities and Exchange Commission and the Federal Reserve would bring mutual fund companies more in line with banks, securities firms, money-service businesses and other companies that are required to file similar reports with the government. A draft of the recommendation is being written and could be offered soon, according to a Treasury Department official who said the proposal would be similar to rules that now apply to banks and other financial companies. The Securities Industry Association had no immediate comment. The recommendation came in a report to Congress regarding implementation of the USA Patriot Act, passed in response to the Sept. 11, 2001, attacks. Among other steps, the law seeks to crack down on money laundering and thwart terrorist financiers. Money laundering involves the movement of profits from drug or arms trafficking, political corruption, prostitution and other illegal activities through a series of accounts or businesses to disguise them as the proceeds of legitimate business. The issue took on heightened importance after the terrorist attacks, which prompted the government to launch a campaign to cut off terrorists from their sources of funding. Mutual fund companies already are subject to other anti-money laundering regulations. Mutual funds are a popular investment for individual investors, with shares in these funds being held by more than half of U.S. households, according to the report. More than 8,300 mutual funds with about $7 trillion in assets were registered with the SEC last year, the report said. Also in Tuesday's report, the Treasury Department, the SEC and the Fed recommended that "unregistered investment companies" - such as hedge funds, venture capital funds, real-estate investment trusts and commodity pools - be required to set up procedures verifying the identity of customers when they open accounts, a provision that applies to other financial institutions. - --- MAP posted-by: Derek