Several statutory and regulatory provisions, and related SRO rules, impose anti-money laundering obligations on broker-dealers, the SEC
notes. While the Bank Secrecy Act was initially adopted in 1970, it is the USA Patriot Act enacted in 2001 that imposed a number of AML obligations directly on broker-dealers, including:
- AML compliance programs;
- Customer identification programs;
- Monitoring, detecting and filing reports of suspicious activity (SARs);
- Due diligence on foreign correspondent accounts, including prohibitions on transactions with foreign shell banks;
- Mandatory information-sharing; and
- Compliance with “special measures” imposed by the Secretary of the Treasury to address particular AML concerns.
FINRA rule 3310
requires member organizations to establish risk-based AML compliance programs. An AML program has to be in writing and include the following elements at a minimum:
- P&Ps and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act;
- P&Ps that can be reasonably expected to detect and cause the reporting of transactions under 31 U.S.C. 5318(g) and the implementing regulations thereunder;
- The designation of an AML compliance officer;
- Ongoing AML employee training; and
- An independent test of the firm’s AML program, annually for most firms.
FINRA notes that broker-dealers’ compliance programs should be tailored to fit their business and risks, considering factors such as size, location, business activities, the types of accounts they maintain, and the types of transactions in which their customers engage.