ANTI-MONEY LAUNDERING (AML)
(NEW) Fraud Prevention: FINRA Urges Firms to Review Their Policies and Procedures Relating to Red Flags of Potential Securities Fraud Involving Low-Priced Securities
Low-priced securities tend to be volatile and trade in low volumes. It may be difficult to find accurate information about them. There is a long history of bad actors exploiting these features to engage in fraudulent manipulations of low-priced securities. Frequently, these actors take advantage of trends and major events to perpetrate fraud. FINRA has observed potential misrepresentations about low-priced securities issuers’ involvement with COVID-19 related products or services, such as vaccines, test kits, personal protective equipment and hand sanitizers. These misrepresentations appear to have been part of potential pump-and-dump or market manipulation schemes that target unsuspecting investors. These COVID-19-related manipulations are the most recent manifestation of this type of fraud.
• FINRA Regulatory Notice 21-03 (February 10, 2021): FINRA Urges Firms to Review Their Policies and Procedures Relating to Red Flags of Potential Securities Fraud Involving Low-Priced Securities
FINRA Provides Guidance to Firms Regarding Suspicious Activity Monitoring and Reporting Obligations
FINRA issued guidance regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310 (Anti-Money Laundering Compliance Program).
• FINRA Regulatory Notice 19-18 (May 6, 2019): FINRA Provides Guidance to Firms Regarding Suspicious Activity Monitoring and Reporting Obligations
FINRA Amends Capital Acquisition Broker Rule 331 to Conform to FinCEN’s Final Rule on Customer Due Diligence Requirements for Financial Institutions
FINRA filed for immediate effectiveness amendments to Capital Acquisition Broker (CAB) Rule 331 (Anti-Money Laundering Compliance Program) to reflect the Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule). The implementation date was November 19, 2018.
• FINRA Regulatory Notice 18-36 (October 19, 2018): FINRA Amends Capital Acquisition Broker Rule 311 to Conform to FinCEN’s Final Rule on Customer Due Diligence Requirements for Financial Institutions
FINRA Amends Rule 3310 to Conform to FinCEN's Final Rule on Customer Due Diligence Requirements for Financial Institutions
FINRA filed for immediate effectiveness amendments to FINRA Rule 3310 (Anti-Money Laundering Compliance Program) to reflect the Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule). The implementation date was May 11, 2018, to align with the compliance date for FinCEN’s CDD Rule.
• CBOE Options Regulatory Circular RG19-002 (January 11, 2019): Anti-Money Laundering Compliance Program - Customer Due Diligence Requirements and Filing Requirements for Certain Trading Permit Holders
FINRA Rule 3310 (Anti-Money Laundering Compliance Program) requires each member firm to develop and implement a written AML program (that must be approved, in writing, by a member of senior management) that is reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act, and the implementing regulations promulgated by the Department of the Treasury. The rule also sets forth, among other things, that the AML program provides ongoing training to appropriate personnel. Information and guidance relating to AML rules, regulations and compliance are available from a number of sources, such as the following:
AML Template for Small Firms
FINRA provides a template for small firms to assist them in fulfilling their responsibilities to establish the AML compliance program required by the Bank Secrecy Act and its implementing regulations and FINRA Rule 3310. The template provides text examples, instructions, relevant rules and websites and other resources that are useful for developing an AML plan for a small firm.
AML Source Tool for Broker-Dealers
The SEC maintains and periodically updates its AML Source Tool for Broker-Dealers, a compilation of key AML laws, rules, orders and guidance applicable to broker-dealers.
SAR Information Accessibility
The Financial Crimes Enforcement Network (FinCEN) regulations regarding the confidentiality of suspicious activity reports (SARs) require a broker-dealer to make SARs and supporting documentation available to any SRO that examines the broker-dealer for compliance with the requirements of 31 CFR 1023.320 (Reports by brokers or dealers in securities of suspicious transactions), also known as the “SAR Rule,” upon the request of the SEC. On January 26, 2012, the SEC issued a letter to FINRA authorizing FINRA staff to ask for SARs and SAR information from firms in certain circumstances. On the same date, SEC staff also issued a letter to chief executive officers of all SEC-registered FINRA firms requesting that they make SARs and supporting documentation available to FINRA.
• FINRA Regulatory Notice 12-08 (February 2012): SEC Requests Broker-Dealers Make SARs and SAR Information Available to FINRA
SAR Alert Message Line
The SEC SAR Alert Message Line phone number is 202-551-SARS (7277). This number should only be used when securities firms have filed a SAR that may require immediate attention by the Commission. Calling the SEC SAR Alert Message Line does not alleviate a firm's obligation to file a SAR or notify an appropriate law enforcement authority, such as a local office of either the Internal Revenue Service Criminal Investigation Division or the FBI. General questions on SARs and other BSA filing requirements may be directed to FinCEN's Regulatory Helpline at 1-800-949-2732.