Two U.S. senators called on regulators to close a “disconcerting loophole” that exempts hedge funds and other private investment firms from reporting suspicious activity within their transactions to authorities.

Sens. Sheldon Whitehouse (D-R.I.) and Elizabeth Warren (D-Mass.) wrote a letter Tuesday to the heads of the Treasury Department and Securities and Exchange Commission (SEC) urging both agencies to re-examine the lack of anti-money laundering and countering the financing of terrorism (AML/CFT) obligations for the private investment industry.

“AML/CFT programs are essential to American national security and a basic pillar of our financial system,” Whitehouse and Warren wrote in the letter. “In short, they help to combat money laundering, terrorism, the proliferation of weapons of mass destruction, and other criminal activity by requiring financial institutions to identify their customers, keep records on the source of client funds, report suspicious activity, and monitor account transactions.”

The senators cited recent news stories claiming Russian oligarchs have accessed American financial markets through private investment firms. Since these firms are not subject to the same federal AML/CFT requirements as banks and other financial institutions under the Bank Secrecy Act (BSA), nor are they regulated by the SEC, the source and beneficial owner of funds these firms invest is difficult to ascertain.

The regulatory gap “threatens to undermine the Biden administration’s historically robust sanctions against corrupt Russian elites,” the senators wrote.

The Treasury Department enforces BSA requirements on banks and other financial institutions, while broker-dealers and other investment firms registered with the SEC also must meet certain AML/CFT rules. But companies representing the estimated $11 trillion private investment industry—which includes hedge funds, private equity firms, and venture capital firms—and their investment advisers are not registered with the SEC and exist outside the regulatory purview of the Treasury.

As a result, the industry is not required to explore the sources and ownership of funds being invested, nor must firms file suspicious activity reports with the Treasury’s Financial Crimes Enforcement Network if they suspect financial transactions on their networks are being used to launder money or fund terrorist groups.

“This loophole undermines anti-corruption, counterproliferation, and counterterrorism programs and lets criminals and sanctioned individuals like Russian oligarchs hide and grow their wealth,” the senators said in a press release accompanying their letter.

A 20-year exemption to federal AML/CFT requirements for the private investment industry was granted by the Treasury in 2002. Since then, the Treasury has sought to overturn the exemption and close the loophole, first with a proposal in 2002 for unregistered investment companies and then with proposals in 2003 and 2015 for investment advisers. None of the proposals moved forward to final approval and implementation.

An anti-corruption initiative launched in December by President Joe Biden proposed “prescribing minimum reporting standards for investment advisers and other types of equity funds.” The initiative acknowledged the loophole noted by the senators, citing the 2015 Treasury proposal that stated, “[I]t [is] possible for money launderers to evade scrutiny more effectively by operating through investment advisers rather than through broker-dealers or banks directly.”

The initiative said the Treasury would re-examine the 2015 proposal and “further consider whether to cover private placement funds, including investments offered by hedge funds and private equity firms.”

Whitehouse and Warren requested the Treasury and SEC provide them with a briefing on their proposed actions by April 12.