Special NASD Notice to Members 02-21 - April 2002

NASD Provides Guidance To Member Firms Concerning Anti-Money Laundering Compliance Programs Required By Federal Law

Executive Summary

On October 26, 2001, President Bush signed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (PATRIOT Act). Title III of the PATRIOT Act, referred to as the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Money Laundering Abatement Act), imposes obligations on broker/dealers under new anti-money laundering (AML) provisions and amendments to the existing Bank Secrecy Act (BSA) requirements.

 

Among other things, the Money Laundering Abatement Act requires all financial institutions, including broker/dealers, to establish and implement, by April 24, 2002, AML programs designed to achieve compliance with the BSA and the regulations promulgated thereunder. The NASD reminds members that violations of the AML laws could lead to criminal prosecution.

 

On February 15, 2002, the NASD filed with the Securities and Exchange Commission (SEC) a rule proposal to prescribe the minimum standards required for each member firm's AML compliance program. A copy of this rule filing can be found on the NASD Regulation AML Web Page. (See www.nasdr.com/money.asp.) NASD Regulation's AML Web Page also provides links to other sites and documents to assist members in understanding their obligations under the AML rules and regulations.

 

On February 25, 2002, the SEC published the proposed rule change in the Federal Register. The SEC received four comment letters in response to the Federal Register publication. Before becoming effective, the proposed rule change must be approved by the SEC.

 

The Securities Industry Association Anti-Money Laundering Committee recently released a preliminary guide for firms to use when developing their AML programs (SIA Guidance). The SIA Guidance generally discusses key elements for broker/dealers to consider in developing effective AML programs. NASD Regulation's AML Web Page provides a link to the SIA Guidance.

The NASD is issuing this Notice to provide guidance to assist members in developing AML compliance programs that fit their business models and needs. A table of contents has been provided for readers' convenience.

 

Because the Department of Treasury (Treasury) is still developing AML rules, the NASD will update its guidance as new rules become final. In the interim, firms must comply with the current requirements of the BSA and the provisions of the Money Laundering Abatement Act that now apply to broker/dealers and should familiarize themselves with the proposed rules that Treasury has issued to date. (For links to Treasury's proposed rules, see www.finra.org/Industry/Issues/AML/index.htm.)

 

Questions regarding this Notice to Members may be directed to Nancy Libin, Assistant General Counsel, Office of General Counsel, NASD Regulation, at (202) 728-8835; Grace Yeh, Assistant General Counsel, at (202) 728-6939; or Kyra Armstrong, Senior Attorney, Department of Member Regulation, at (202) 728-6962.