Formal anti money laundering program

These documents may include:. B Verification through non-documentary methods. For a bank relying on non-documentary methods, the CIP must contain procedures that describe the non-documentary methods the bank will use. C Additional verification for certain customers. The CIP must address situations where, based on the bank's risk assessment of a new account opened by a customer that is not an individual, the bank will obtain information about individuals with authority or control over such account , including signatories, in order to verify the customer 's identity.

This verification method applies only when the bank cannot verify the customer 's true identity using the verification methods described in paragraphs a 2 ii A and B of this section. The CIP must include procedures for responding to circumstances in which the bank cannot form a reasonable belief that it knows the true identity of a customer. These procedures should describe:. A When the bank should not open an account ;. B The terms under which a customer may use an account while the bank attempts to verify the customer 's identity;.

C When the bank should close an account , after attempts to verify a customer 's identity have failed; and. D When the bank should file a Suspicious Activity Report in accordance with applicable law and regulation. The CIP must include procedures for making and maintaining a record of all information obtained under the procedures implementing paragraph a of this section. At a minimum, the record must include:.

A All identifying information about a customer obtained under paragraph a 2 i of this section;. B A description of any document that was relied on under paragraph a 2 ii A of this section noting the type of document, any identification number contained in the document, the place of issuance and, if any, the date of issuance and expiration date;. C A description of the methods and the results of any measures undertaken to verify the identity of the customer under paragraph a 2 ii B or C of this section; and.

D A description of the resolution of any substantive discrepancy discovered when verifying the identifying information obtained. The bank must retain the information in paragraph a 3 i A of this section for five years after the date the account is closed or, in the case of credit card accounts, five years after the account is closed or becomes dormant.

The bank must retain the information in paragraphs a 3 i B , C , and D of this section for five years after the record is made. This may be done by checking a list that FinCEN makes available. OFAC is an office within Treasury that administers and enforces economic and trade sanctions based on U. OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and freeze foreign assets under U.

As a tool in administering sanctions, OFAC publishes lists of sanctioned countries and persons that are continually being updated. Its list of Specially Designated Nationals and Blocked Persons SDNs lists individuals and entities from all over the world whose property is subject to blocking and with whom U.

Broker-dealers must report all blockings and rejections of prohibited transactions to OFAC within 10 days of their being identified and annually.

In addition to the blocking sanctions described above, OFAC maintains several sanctions programs that prohibit U. OFAC has the authority to impose substantial civil penalties administratively. If transactions originate from or are routed to any FATF-identified countries, it might be an indication of suspicious activity. FinCEN also adopted a number of AML requirements, including the requirement to obtain beneficial ownership information. See 81 Fed. Customer comparisons to lists issued by OFAC involve separate and distinct requirements.

These publications include: statistics regarding SAR filings and trends; an industry forum highlighting compliance issues and practices prepared by private sector members of the Advisory Group; and guidance regarding practical issues relevant to SAR filing and reporting. See 68 Fed. Search SEC. Securities and Exchange Commission.

The information in this guide is current as of January 5, When using this research tool, you should keep the following in mind: First, broker-dealers are responsible for complying with all AML requirements to which they are subject.

Chapter X. The General Provisions Part Part contains regulatory requirements that apply to more than one type of financial institution, and in some cases, individuals. The financial-institution-specific parts contain regulatory requirements specific to a particular type of financial institution.

Part pertains to broker-dealers 31 C. Exchange Act Rule 17a 17 C. An AML program must be in writing and include, at a minimum: policies, procedures, and internal controls reasonably designed to achieve compliance with the BSA and its implementing rules; policies and procedures that can be reasonably expected to detect and cause the reporting of transactions under 31 U.

These should include, but not be limited to procedures to: 1 identify and verify the identity of customers, 2 understand the nature and purpose of customer relationships to be able to develop a risk profile and 3 conduct ongoing monitoring to identify and report suspicious transactions as well as maintain and update customer information, including beneficial ownership information for legal entity customers.

See also 68 Fed. See also 67 Fed. The letters provide staff no-action statements regarding broker-dealers relying on investment advisers to conduct the required elements of the CIP rule.

I, Issue 1 Sept. Beneficial Ownership Covered financial institutions are required to establish and maintain written procedures that are reasonably designed to identify and verify beneficial owners of legal entity customers and to include such procedures in their anti-money laundering compliance program required under 31 U.

Beneficial owner means each of the following: Each individual, if any, who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25 percent or more of the equity interests of a legal entity customer; and A single individual with significant responsibility to control, manage, or direct a legal entity customer, including: An executive officer or senior manager e.

If a trust owns directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, 25 percent or more of the equity interests of a legal entity customer, the beneficial owner shall mean the trustee. Adopting Release: 81 Fed. See also 31 C. Adopting Release: 67 Fed. Proposed Rule: 66 Fed. Adopting Releases : 71 Fed. The firm, however, must have a written confidentiality agreement or other arrangement with the parent specifying that the parent entity must protect the confidentiality of the SAR through appropriate internal controls.

The firm must provide annual training to those employees who work in or oversee areas that are susceptible to money laundering. FCMs and IBs that engage solely in proprietary trading or that are inactive may conduct the audit every two years. A firm may allocate some of its AML responsibilities to another Member as long as the details of the allocation are set forth in writing.

The firm must also have a reasonable basis for believing that the other party is properly performing the required functions. If the other firm does not perform the functions properly, however, your firm remains liable for the failure. A Member may delegate some or all of its CIP duties to a third party service provider as long as there is a written agreement with the third party service provider that outlines its responsibilities.

The FCM or IB remains solely responsible for ensuring compliance with CIP requirements, so the firm should actively monitor the delegation to ensure that the CIP procedures are being conducted effectively. A beneficial owner of a legal entity customer is an individual that meets the ownership prong test i. The main components that must be included are: Internal policies, procedures and controls reasonably designed to achieve compliance with the Bank Secrecy Act and implementing regulations; Appointment of a designated compliance officer to oversee the program's day-to-day operations; Ongoing training program; Independent audit; and Appropriate risk-based procedures for conducting customer due diligence including, but not limited to: understanding the nature and the purpose of developing a customer risk profile; and conducting ongoing monitoring to detect and report suspicious transactions and on a risk basis to maintain and update customer information including identifying and verifying beneficial owners.

What types of Members need to have an AML program? What must a Member's internal policies, procedures, and controls cover? What is a customer identification program CIP? The CIP must list the identifying information the Member will collect and include procedures that cover: Verifying the identifying information; Recordkeeping; Comparing customer names and information with certain government lists; Customer notices; and Relying on other Members to conduct all or part of the firm's CIP if applicable.

Does my firm have to apply the CIP to existing customers that open a new account?