MasterCompliance continues to provide clients and the public with guidance on industry focus areas, new rules, compliance foundations, and regulatory priorities. This blog explores our top six most popular blog posts.
It’s that time of the year again! As the fourth quarter ticks by, we have compiled a helpful end of year to-do list to aid small broker-dealers in addressing and closing out important annual compliance requirements.
During April and May 2019, FINRA introduced a new AML podcast. FINRA’s unscripted podcast explained the importance of a solid AML program, its importance to the overall industry, and best practices. Blake Snyder and Jason Foye of FINRA’s AML investigative unit were the guest speakers.
[Continued from Customer Identification Program (CIP): Common Questions – Part I]
What Is A “Reasonable Time” To Verify Customers’ Identities?
A customer’s identity must be verified within a “reasonable time” before or after the customer’s account is opened. The rule does not specify what counts as a “reasonable time,” and the Adopting Release for the Broker-Dealer CIP Rule emphasizes that broker-dealers must be reasonably flexible when undertaking such verification. The broker-dealer must be able to undertake verification before or after an account if opened, as the amount of time needed may depend on various factors, which is part of the firm’s risk assessment. A firm’s CIP procedures must enable the broker-dealer to form a reasonable belief that it knows the true identity of each customer. Read More…
In our previous post on customer identification programs, “Customer Identification Program (CIP): Definitions and Requirements,” we defined “account” and “customer” and went over the minimum requirements for CIP procedures and verification, including touching on non-documentary means of identity verification. This post will get a little more specific, addressing common questions firms have when developing and implementing their customer identification programs. Read More…
How Does Risk Assessment Affect a Firm’s CIP?
Appropriate verification procedures for a CIP are governed by a risk-based assessment. A CIP must include risk-based procedures for verifying the identity of each customer to a reasonable and practicable extent. These procedures must be based on the broker-dealer’s assessment of the relevant risks, including those presented by the types of accounts maintained by the broker-dealer, the methods of opening accounts, and the types of identification information available. Additionally, this risk-based assessment should take into consideration the broker-dealer’s size, location, and customer base.
Customer Identification Program
A broker-dealer must establish, document, and maintain a written Customer Identification Program (CIP) as a part of the broker-dealer’s anti-money laundering (AML) compliance program (31 CFR 1023.220) as required by FINRA Rule 3310. The CIP must be appropriate for the broker-dealer’s size and business, and it must outline the following procedures: Read More…
Welcome to the second part of our three-part series on Regulatory Technology (RegTech) tools and the securities industry! As we discussed in our previous post, “RegTech: Surveillance and Monitoring,” more and more members of the financial services industry are using RegTech tools to effectively and more efficiently meet their regulatory compliance requirements. FINRA has identified five major areas in which RegTech tools are being applied: surveillance and monitoring, customer identification and anti-money laundering (AML) compliance, regulatory intelligence, reporting and risk management, and investor risk assessment. Today we will be focusing on customer identification and AML compliance RegTech applications.
FINRA Rule 3310 sets forth minimum standards for the required anti-money laundering (AML) compliance programs to be implemented by broker-dealers. This written AML compliance program must be reasonably designed to achieve and monitor compliance with the requirements of The Currency and Foreign Transactions Reporting Act of 1970 (more commonly known as the “Bank Secrecy Act” or “BSA”) and with the implementing regulations declared thereunder by the U.S. Department of the Treasury. Read More…
Per the Bank Secrecy Act (BSA) and FINRA Rule 3310, FINRA member firms are required to establish Anti-Money Laundering (AML) compliance programs. To assist its smaller member firms with fulfilling these responsibilities, FINRA publishes the “Anti-Money Laundering Template for Small Firms”, which provides instructions, relevant rules, text examples, relevant websites, and other resources that can be used to develop an AML plan for a small firm.