The Bank Secrecy Act (“BSA”) and FINRA rules (3310) require financial firms, including broker dealers, to develop and implement anti-money laundering (“AML”) compliance programs.  AntiMoneyLaunderingThese programs must be:

  1. Written,
  2. Designed to implement policies, procedures, and internal controls to ensure compliance with the BSA and FINRA AML regulations, and
  3. Approved by a member of senior management.

Additional aspects of a firm’s AML program include:

Suspicious Activity Reporting (SAR) – Firms are required to report suspicious or potentially suspicious activity, including money laundering, to the Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury.  Examples of suspicious activity may  include:

  • Frequent wire transfers to seemingly unrelated accounts
  • Customers who request account statements and trade confirmation be destroyed as opposed to mailed

Currency Transaction Reports (CTR) – A report that financial firms must file for each deposit, withdrawal, exchange or other payment or transfer in currency (e.g. cash, money orders, traveler’s checks) in excess of $10,000.

Customer Identification Program (CIP) – This requires that the identity of all new customers be verified by documentary (e.g. government-issued photo IDs) or non-documentary (e.g. credit checks or articles of incorporation).

Knopman Notes:
Anytime an investor engages in suspicious behavior or initiates transactions around $10,000, money laundering questions arise.

Relevant Exams:
Series 7, Series 24, Series 63, Series 65, Series 66, Series 79