“Money is not peace of mind. Money’s not happiness. Money is, at its essence that measure of man’s choices.” Marty Byrde, Ozark – Season 1

Money laundering has been around as long as money has been around. Various hot spots for money laundering include car washes, laundry mats, lawn services, and the list goes on. However, it can also be found in the broker dealer industry. Without solid anti-money laundering compliance in place, your broker dealer could be ripe for illegal activity.

The Financial Industry Regulatory Authority (“FINRA”) Rule 3310 gives regulations on how to protect broker dealers from money laundering. No broker dealer is excluded from this rule. Every broker must be in compliance with the Bank Secrecy Act of 1970 (“BSA”). The Bank Secrecy Act includes five pillars:

  • Designation of a compliance officer: The broker dealer’s compliance officer and the designated anti-money laundering (“AML”) person must be report to FINRA. Any changes to this position must be reported to FINRA within thirty days and verified within seventeen business days after the calendar year’s end.
  • Development of internal policies: The broker dealer must establish written policies and procedures in order to detect any suspicious transactions and to maintain compliance within the broker dealer.
  • Employee training: The broker dealer must implement continuous employee training with regards to money laundering
  • Independent testing & auditing: The broker dealer must undergo at least an annual (calendar year) independent audit by a qualified third party to ensure that the firm’s anti-money laundering policies and procedures along with all other aspects of FINRA Rule 3310 are being followed.
    • The only exceptions to an annual anti-money laundering audit are listed below. If any of these apply to the broker dealer, the AML audit can be completed every two years (calendar year).
      • If the broker dealer does not participate in executing transactions for its customers
      • If the broker dealer does not hold customer accounts
      • If the broker dealer does not act as an introducing broker dealer
    • Customer due diligence: The broker dealer must have procedures in place to “get to know” its customers. The firm must know the nature and purpose of its customer relationships, and continuously monitor activity for any suspicious or unusual transactions.

Each of the pillars listed above are key to protecting your broker dealer from money laundering. No two broker dealers will have the same anti-money laundering program as every broker dealer should tailor its program to meet that broker dealer’s needs. If your broker dealer needs assistance with any anti-money laundering compliance needs, please contact Securities Compliance Management here to discuss how we can help your broker come into proper compliance with FINRA.