Anti-Money Laundering Rules Affecting Futures Commission Merchants
FIA/SIA Letters to the Financial Crimes Enforcement Network regarding the Final Rule for Section 312 of the USA Patriot Act. Anti-Money Laundering: FIA Asks CFTC for No-Action Letter on Customer Identification SAR Reporting Requirements and AML Update -- 4/9/2004 thru 5/18/2004 NFA: TREASURY: Treasury Designates Commercial Bank of Syria as Financial Institution of Primary Money Laundering Concern Treasury Designates Bosnian Charities Funneling Dollars to Al Qaida U.S. Announces Easing and Lifting of Sanctions Against Libya Treasury to Issue General License Lifting Much of Economic Embargo FinCEN: Enforcement Action in the Matter of Riggs Bank FinCEN Assesses $25 million Civil Money Penalty Against Riggs Bank N.A. SAR Activity Review: By the Numbers Imposition of Special Measures Against Burma Imposition of Special Measures Against Myanmar Mayflower Bank and Asia Wealth Bank Proposed Changes to CMIR Form to Streamline Reporting Process, Enhance Information for Law Enforcement FEDERAL RESERVE: Anti-Money Laundering: FSA Hits Bank of Scotland with Huge Fine
Anti-Money Laundering: FIA Asks CFTC for No-Action Letter on Customer Identification
SAR Reporting Requirements and AML Update -- 4/9/2004 thru 5/18/2004
Treasury Designates Commercial Bank of Syria as Financial Institution of Primary Money Laundering Concern
Treasury Designates Bosnian Charities Funneling Dollars to Al Qaida
U.S. Announces Easing and Lifting of Sanctions Against Libya Treasury to Issue General License Lifting Much of Economic Embargo
Enforcement Action in the Matter of Riggs Bank
FinCEN Assesses $25 million Civil Money Penalty Against Riggs Bank N.A.
SAR Activity Review: By the Numbers
Imposition of Special Measures Against Burma
Imposition of Special Measures Against Myanmar Mayflower Bank and Asia Wealth Bank
Proposed Changes to CMIR Form to Streamline Reporting Process, Enhance Information for Law Enforcement
Anti-Money Laundering: FSA Hits Bank of Scotland with Huge Fine
Anti-Money Laundering: New Guidance on Verifying Customer Identities
Anti-Money Laundering: Final Rule Issued for Reporting Suspicious Activity
The U.S. Treasury Department has issued a final regulation requiring futures commission merchants and introducing brokers to file reports with the Financial Crimes Enforcement Network when they detect suspicious activity. This requirement applies to transactions in funds or assets of at least $5,000. The procedures for monitoring suspicious activity and filing must now be incorporated in the firm's written anti-money laundering compliance program. Failure to file or a late filing of a suspicious activity report is subject to civil money and criminal penalties. The effective date of the rule is Dec. 22 and the applicability date is May 18, 2004.
A committee of FIA Law and Compliance Division chaired by Bill McCoy of Morgan Stanley has been working with Treasury and the CFTC to express the FIA's views in the drafting process and to garner further guidance on open issues related to anti-money laundering compliance requirements. On July 9, the FIA filed a comment letter supporting the proposed SAR rules but requesting clarification in certain areas. The letter (see link below) asked Treasury how the rules would apply in certain situations, such as with futures commission merchants that are also registered as broker-dealers. The FIA also suggested that executing and clearing brokers involved in "give-ups" with the same customer should be required to file only one suspicious activity report and urged Treasury to allow the sharing of information about suspicious activity between U.S. FCMs and foreign brokers and between U.S. FCMs and CTAs where they share the same customers.
The final rule clarifies that an FCM/BD can file a single SAR report to either an appropriate securities or futures regulator or SRO. When two FCMs are involved in a transaction with the same customer, such as in a "give-up" arrangement, either firm filing a SAR report can satisfy the obligation of both FCMs to file. Treasury will be issuing guidance on how financial institutions can file joint SARs in the appropriate circumstances. On the issue of sharing information with entities that are not "financial institutions" under the Bank Secrecy Act, such as CTAs and foreign brokers, Treasury noted that because foreign entities are not "financial institutions" they are not eligible for protections under the Bank Secrecy Act.
In addition, the FIA has been seeking clarification with respect to another important area of AML compliance--the customer identification requirements. On July 22, FIA sent a letter (see link below) requesting clarification on these rules. Treasury has not yet issued any guidance on this matter.
The FIA on July 22 sent a letter to the CFTC requesting clarification on several issues raised by the final rules implementing section 326 of the USA Patriot Act. Industry groups were encouraged to submit questions and proposed answers to issues raised by the final rules. The Treasury Department is expected to gather issues and publish guidance in areas where many industries express common concerns. FIA raised questions concerning when a customer can be said to open a "new account" therefore requiring that customer identification procedures be undertaken, when an FCM and IB can rely upon another financial institution including an affiliate to perform some of the CIP functions, when an FCM can rely on a foreign financial institution subject to similar anti-money laundering requirements to perform customer identification procedures, and identifying who is the executing broker’s customer in the case of a three party give-up arrangement. FIA offered that when the give-up arrangement is entered into with an account manager acting on behalf of the manager’s customers, the executing FCM’s customer for purposes of AML customer identification requirements would be the account manager, not the underlying customers. The carrying FCM would be responsible for verifying the identity of the underlying customers.
To help guide the Treasury Department as it develops anti-money laundering rules and regulations for futures commission merchants, the FIA submitted a letter on March 6 describing certain characteristics of the futures industry that should be considered in the rule-making process. For example, many futures transactions are executed and cleared on behalf of intermediaries, such as other brokers and collective investment vehicles. In such circumstances, the letter said, FCMs should be allowed to rely on these intermediaries to identify customers and verify that they are not engaged in suspicious activities. Treasury took this view when it issued proposed rules in July 2002, and the letter urged the agency to maintain this position, even when the intermediary is located outside the U.S.
The letter went on to describe situations where both the FCM and the intermediary have a direct relationship with the underlying customer. Even in such situations, the FCM should be allowed to rely on the intermediary to identify customers, the letter said, since the introducing broker or advisor has a more direct relationship with the customer and is in a better position to verify their identity. “We understand that this approach…does not relieve an FCM of the obligation to verify the identity of its customers. It simply permits the FCM to rely on another party to perform this function when such reliance is reasonable,” the letter said.
With respect to give-up arrangements, the letter suggested that the anti-money laundering obligation should fall on the carrying broker, rather than the executing broker, since the carrying broker has a more direct and more comprehensive relationship with the customer. The letter described in detail how give-up relationships work in both the domestic and cross-border context, and urged Treasury to apply this rationale in both contexts.
10-4-2002: Proposed Suspicious Activity Reports by the Securities and Futures Industry (SAR-SF)
9/6/2002: Section 326 Proposed Rule-Customer Identification
4/3/2002: Special Information Sharing Procedures to Deter Money Laundering and Terrorist Activities Attention: Propose Rule - Special Information Sharing - Section 314
3/1/2002: Re: Proposed Amendment to the Bank Secrecy Act Regulations - Requirements of Brokers or Dealers in Securities to Report Suspicious Transactions
FIA/SIFMA File Joint Comment Letter on Fincen SAR Proposals
FIA and SIFMA filed a joint comment letter on rules proposed by the Treasury Department's Financial Crimes Enforcement Network regarding Suspicious Activity Reports. In the June 8 2009 joint letter, FIA and Sifma stressed the importance of firms being able to share these reports with all affiliates within the organiz ation regardless of whether foreign or domestic. In addition, FIA and SIFMA stressed the importance of permitting each organization to make its own assessment of how to maintain confidentiality among affiliates receiving those SARs rather than imposing an obligation to establish confidentiality agreements between affiliates.
FIA Suggests Changes to Anti-Money Laundering Reporting Form
The Futures Industry Association submitted a letter to the Financial Crimes Enforcement Network on Feb. 3, 2009 suggesting several changes to the form used by securities and futures firms to report suspicious activity. Among other things, the FIA said the form should be revised so that there is more space for information and recommended several specific changes to accommodate the international scope of the futures industry. FinCEN is the anti-money laundering arm of the U.S. Treasury Department.