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AML Compliance Program

FINRA and the SEC have sanctioned many firms and individuals for not establishing or following their AML Compliance Program. The NASD NtM 02-21 provides guidance for member firms to build their program. The findings have ranged from not having adequate safeguards based on the firm’s business model to “willful blindness”. We are all aware that compliance is an important and expensive function of the broker-dealer’s business but the consequences of not maintaining an adequate program can be detrimental to your reputation and balance sheet.
AML can be complex depending upon your business and customers. Your compliance staff should be aware of all aspects, e.g. Red Flags. Ignoring Red Flags can put the firm at serious risk. Let’s look at an example: a customer brokerage account has a normal amount of activity for its profile. The account begins to receive wires in and the account trades more actively and wires begin to go out to third parties. The RR has little communication with the client due to the client’s business travel. Unknown to the RR, the firm received a letter requesting that the cell phone on the account be changed due to an increase in said travel. The operations group changes the contact and sends a confirmation to the client’s address of record. After several months, the client returns from their extended travels and calls you regarding all the activity in his account. The RR said that he noticed the increase in funds and activity and assumed this was related to the increased business activity and as such, there was no issue. What happened? The client’s account was compromised, his identity was stolen, and the account was being used to launder money. When the operations group called the “new” cell phone to verify certain wires it was approved by the answering party. What should have taken place? The RR should have notified the firm’s compliance department at the first signs of unusual activity and followed their instructions.
Don’t overlook these items, know your AML program and train your supervisors and RRs on the requirements. Be familiar with SARs, Red Flags, CIP, FinCEN and OFAC. RegMaven can assist you with developing, implementing, training and monitoring your AML Program. Call us to discuss your needs. You can reach us at our website at: or via email at:

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