Newsletter | Volume 1

AML compliance has traditionally been concentrated in the financial and banking industry. However, regulators have now expected a widening the selection from financial institutions to Advisors, Brokers and Dealers to strengthen their controls against money laundering.

Investment Advisers, Brokers and Dealers must get ready to comply with the strict global AML regulatory requirements so that the oversight authorities can carry out monitoring of customer and account checks and balances.

Financial institutions, banks, broker-dealers, and mutual funds have already established an existing AML framework to comply with a risk-based anti-money-laundering program with reporting of suspicious account activities.

In the US the SEC has started to levy multimillion-dollar fines against broker-dealers and cracked down on lapses in controls, inadequate customer monitoring and failure to report suspicious activity — penalties that show the seriousness with which the oversight authorities take AML lapses it oversees.

The new belief is that investment advisers are on the front lines of a multi-trillion dollar sector of the global financial system. Therefore to crack down on the cleaning, moving or stashing dirty money, investment advisers who often have an in-depth knowledge of the reasons and size of the assets in questions must be vigilant and protect the integrity of the financial sector.

In the following newsletters, we will revisit and update the major requirements establishing an AML program, preparing for AML compliance (due diligence, examination, and enforcement remediation) and how to maintain an adequate customer identification program.

Rightly the regulators are expected a widening the range of financial firms to strengthen their controls against money laundering. The SEC has recently emphasised the global importance of AML compliance for companies under its jurisdiction with regulatory priorities and higher penalties. In future violations will attract intense scrutiny during routine examinations. Also, AML enforcement will be stronger if investment advisers are subject to AML obligations similar to those imposed on broker-dealers and other securities firms.

Types of behaviour that suggest the customer engaged the consultant for unlawful purposes — and that might require a Suspicious-Activity Reporting (SAR) — include:

The use of securities accounts, for transactions that are unrelated to securities
Lack of customer concerns on high fees or continued losses in the accounts
Customer focuses on the movement of funds e.g. concentration of trading in thinly traded securities (micro cap securities or penny stocks)
Currency transaction with reporting of money transfers of more than $10,000 by or through the investment adviser
Record keeping in compliance with the travel rule; which requires firms to create and retain records of transmittals exceeding $3,000.
Ensure that information on the transmittal travels to the next financial institution in the payment chain
Information sharing and responses to law-enforcement requests for accounts or transactions held by persons the government suspects of illegal activity

So much to do and so little time to do it properly
At the 10th annual European GRC and IT Security Summit, we have dedicated a ½ day workshop on updating participants on the new Financial Compliance regime. For details on the seminar/parallel session on financial compliance concerns and the effect of the regulatory overreach on the global financial services concept http://www.grcassembly.com/workshop.htm

For details see; https://www.gpo.gov/fdsys/pkg/FR-2015-09-01/pdf/2015-21318.pdf