FINRA issues guidelines encouraging businesses to prepare for upcoming anti-money laundering rules | Skadden, Arps, Slate, Meagher & Flom LLP


On October 8, 2021, the Financial Sector Regulatory Authority (FINRA) published a regulatory notice urging its member companies (that is to say., brokers) to consider how they will integrate the government-wide anti-money laundering and terrorist financing (CFT) priorities of the US Treasury Department into their AML-based compliance programs. the risks. .1

Although the Treasury’s Financial Crimes Enforcement Network (FinCEN) has yet to promulgate final regulations specifying how financial institutions, including brokers, should integrate AML / CFT priorities, it is expected that these will be published. by the end of the year. Proactive assessment of how to implement the priorities would allow companies to quickly integrate final regulations and ensure compliance with applicable regulations, including FINRA Rule 3310.2

AML / CFT priorities and application to FINRA member firms

FinCEN published the AML / CFT priorities on June 30, 2021. As we noted in a recent client alert, FinCEN has defined eight priorities and made reference to previous FinCEN opinions and guidance documents that identify the typologies and red flags that can help covered entities comply with their banking obligations. Obligations of the secrecy law (BSA).3 The eight priorities are: (1) corruption; (2) cybercrime, including relevant cybersecurity and virtual currency considerations; (3) the financing of foreign and domestic terrorism; (4) fraud (including securities and investment fraud and internet fraud); (5) activity of transnational criminal organization; (6) activity of organizing drug trafficking; (7) trafficking in human beings and trafficking in human beings; and (8) proliferation financing.

Along with the AML / CFT priorities, FinCEN issued a statement to provide covered Non-Bank Financial Institutions (NBFIs), including brokers, with advice on how to approach AML / CFT priorities.4 The AML / CFT priorities and FinCEN statement make it clear that the final regulation will specify how financial institutions are to integrate the priorities into their risk-based AML programs, that not all priorities will be relevant for every covered institution, and that the covered entities are not required to incorporate the priorities until the date of entry into force of the final regulation.

FINRA opinion

FINRA issued the notice on October 8 to inform member companies of the AML / CFT priorities and the FinCEN statement for NBFIs and to encourage companies to think about how to mainstream AML / CFT priorities in their risk-based AML compliance programs.

Under FINRA Rule 3310, member firms are required to develop and implement a written anti-money laundering program reasonably designed to monitor their compliance and meet the requirements of the BSA and any implementing regulations thereunder.

The issuance of AML / CFT Priorities does not trigger an immediate change in BSA requirements or prudential expectations for member companies. However, FINRA encourages member companies to start assessing how they will integrate and document AML / CFT priorities into their risk-based AML programs. More specifically, FINRA encouraged member companies to:

  • Consider potential updates to red flags companies have incorporated into their risk-based AML compliance programs in light of the risks presented by factors such as their business operations, size, geographic locations in which they operate, the types of accounts they maintain, and the types of transactions in which they and their clients engage; and
  • Consider potential technological changes that may be appropriate in order to integrate AML / CFT priorities into their compliance programs, including changes to the technology used to monitor and investigate suspicious activity.

Take away food

To comply with upcoming regulations and prudential expectations, it will be important for brokers to perform up-to-date assessments of their risk profiles and applicable control environments related to their risk-based AML compliance programs.

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1 Financial Sector Regulator, Regulatory Notice 21-36 (October 8, 2021).

2 FINRA, Rule 3310 (2018) (Anti-Money Laundering Compliance Program).

3 See our client alert of July 21, 2021 “FinCEN defines priorities in the fight against money laundering, with implementing regulations to follow”.

4 US Treasury, Financial Crimes Enforcement Network, Statement on National Anti-Money Laundering / Terrorist Financing Priorities (AML / CFT) (June 30, 2021).

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