finra

FINRA

For Release:
Contacts:
Wednesday, January 30, 2002
Nancy A. Condon
202-728-8379
Michael Shokouhi
202-728-8304



 

NASD Board Approves Proposed Rule on Requirements of Anti-Money Laundering Compliance Programs

Washington, DC—The National Association of Securities Dealers, Inc. (NASD®) Board of Governors has approved a proposed rule setting forth the requirements for anti-money laundering compliance programs of NASD members. The proposal serves to implement, in part, the recently enacted anti-terrorism legislation, the USA PATRIOT Act, which requires that financial institutions, including broker-dealers, establish anti-money laundering compliance programs by April 24, 2002.

 

THE USA PATRIOT ACT

 

In the wake of the September 11 attacks, President Bush signed into law the USA PATRIOT Act, which is designed to thwart international money laundering and terrorist financing. The Act significantly strengthens earlier anti-money laundering laws, including the original Bank Secrecy Act, which imposes record-keeping and reporting requirements on certain financial institutions, including broker-dealers, such as the need to keep records and file reports on currency transactions and foreign bank accounts.

 

The USA PATRIOT Act strengthens the earlier laws both by imposing new obligations on financial institutions, including broker-dealers, and extending previously existing requirements to more firms. Among other things, under the USA PATRIOT Act, all broker-dealers will be required to track and report suspicious transactions (by filing Suspicious Activity Reports), develop comprehensive anti-money laundering compliance programs, institute special due diligence checks for certain customers, and close accounts with foreign shell banks that have no physical presence or operations.

 

TREASURY'S PROPOSED REGULATIONS

 

The Department of Treasury recently proposed regulations for the reporting of suspicious transactions by broker-dealers, including the setting of reporting threshold amounts, and on the acceptance of certain "correspondent" accounts. Among the kinds of activities that might cause a firm to be suspicious of money laundering activity include a customer's refusal to provide information necessary for a firm to make reports required under the Act, or a customer's frequent use of large-scale wire transfers, with little or no corresponding investments. Following Treasury's approval of its regulations in this area, NASD members will need to incorporate these requirements into their anti-money laundering compliance programs.

 

NASD'S PROPOSED RULE ON COMPLIANCE PROGRAMS

 

Because a well-established anti-money laundering compliance program plays a key role in complying with all of the Act's provisions, the NASD approved a proposed rule setting forth the essential requirements of members' compliance programs.

 

The proposed rule would require member firms to develop, and a member of the firms' senior management to approve, anti-money laundering programs designed to achieve and monitor compliance with the Bank Secrecy Act and related regulations. Specifically, the rule would require member firms to:

 

  • Establish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions that raises a suspicion of money laundering;

  • Establish and implement policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act and regulations thereunder;

  • Provide for independent testing for compliance to be conducted by member personnel or by a qualified outside party;

  • Designate an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the program; and

  • Provide ongoing training for appropriate personnel.

 

The NASD's proposed rule will be submitted to the Securities and Exchange Commission (SEC) shortly. Following SEC approval, NASD Regulation will incorporate compliance checks in its examination program and will assist members in establishing Best Practices methodology. NASD Regulation staff also will be developing guidance for investors, who may be faced with requests from their brokerage firms for additional information in light of the new anti-terrorism laws.

 

Investors can obtain more information about NASD Regulation as well as the disciplinary record of any NASD-registered broker or brokerage firm by calling (800) 289-9999, or by sending an e-mail through NASD Regulation's Web Site, www.nasdr.com.

 

The National Association of Securities Dealers, Inc. (NASD) is the largest securities-industry, self-regulatory organization in the United States. It is the parent of NASD Regulation, Inc., the American Stock Exchange, LLC and NASD Dispute Resolution, Inc. For more information about the NASD and its subsidiaries, please visit the following Web sites: www.nasd.com; www.nasdr.com; www.amex.com; www.nasdadr.com.