Anti-Money Laundering Guidance

Written by: James Underwood

After the US Patriot Act, all of the financial institutions like banks, dealers and brokers had to implement anti-money laundering programs. These regulations must be developed and written by each individual institution. The written regulations must be approved by a senior manager and designed to monitor their member’s compliance with the Bank Secrecy Act. The Bank Secrecy Act states that a financial institution must implement a written based customer identification program that includes customer information, methods to verify identification and the comparison of names against a government anti-terrorist list. These regulations that are established must:

• Be able to detect and report suspicious transactions
• Provide independent testing for compliance by an outside party
• Designate and identify the individuals who are in control of the day to day operations and give this information to National Ag Safety Database (FINRA/SIPC)
• Provide ongoing training for employees

It is the financial institutions job to report suspicious activity to the Financial Crimes
Enforcement Network (FinCEN). It also must report any transaction that involves at least $5000 in money or assets if it involves funds from an illegal activity, is designed to evade the Bank Secrecy Act, transaction seems to serve no business or lawful purpose, or if it uses a broker or dealer for criminal activity. Also, if a series of patterns is detected FinCEN must be notified. The institution does not have to report the activity if there is a robbery or missing or stolen securities that are reported by the financial institution to the proper authorities.

The financial institution must also be able to identify their customer’s true identity through the use of customer identification programs or CIP’s. The institution must set up documents and maintain a written CIP containing identity verification, recordkeeping, and comparison with government lists. It also must include risk assessment procedure based on the customer’s relevant risks including the types of accounts, how the accounts were opened, the types of information given and the institutions size and customer base.

Related Information:

• www.occ.treas.gov/handbook/bsa.pdf
• www.sec.gov/spotlight/moneylaundering.htm

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