1. Firm Policy
It is the policy of the firm to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.
Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the “placement” stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler’s checks, or deposited into accounts at financial institutions. At the “layering” stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the “integration” stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.
Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.
Our AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business.
2. AML Compliance Person Designation and Duties
The firm has designated Zhenhao Fei as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the firm’s AML program. Zhenhao Fei has a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge and training. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligations, overseeing communication and training for employees. The AML Compliance Person will also ensure that the firm keeps and maintains all of the required AML records and will ensure that Suspicious Activity Reports (SAR-SFs) are filed with the Financial Crimes Enforcement Network (FinCEN) when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the firm’s AML program.
3. Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions
a. FinCEN Requests Under USA PATRIOT Act Section 314(a)
We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning accounts and transactions (a 314(a) Request) by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure Web site. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, Zhenhao Fei will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), Zhenhao Fei will structure our search accordingly.
We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. Zhenhao Fei will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of customers’ nonpublic information.
We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request.
Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.
Grand Jury Subpoenas
We understand that the receipt of a grand jury subpoena concerning a customer does not in itself require that we file a Suspicious Activity Report (SAR-SF). When we receive a grand jury subpoena, we will conduct a risk assessment of the customer subject to the subpoena as well as review the customer’s account activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that customer’s risk assessment and file a SAR-SF in accordance with the SAR-SF filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents or the information we used to respond to it. To maintain the confidentiality of any grand jury subpoena we receive, we will process and maintain the subpoena. If we file a SAR-SF after receiving a grand jury subpoena, the SAR-SF will not contain any reference to the receipt or existence of the subpoena. The SAR-SF will only contain detailed information about the facts and circumstances of the detected suspicious activity.
c. Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)
We will share information with other financial institutions regarding individuals, entities, organizations, and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. Zhenhao Fei will ensure that the firm files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s Web site. Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even to financial institutions with which we are affiliated and that we will obtain the requisite notices from affiliates and follow all required procedures.
We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the firm’s other books and records.
We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:
identifying and, where appropriate, reporting on money laundering or terrorist activities;
determining whether to establish or maintain an account, or to engage in a transaction; or assisting the financial institution in complying with performing such activities.
d. Joint Filing of SARs by Broker-Dealers and Other Financial Institutions
We will file joint SARs in required circumstances. We will also share information about a particular suspicious transaction with any broker-dealer, as appropriate, involved in that particular transaction for purposes of determining whether we will file jointly a SAR-SF.
We will share information about particular suspicious transactions with our clearing broker for purposes of determining whether we and our clearing broker will file jointly a SAR-SF. In cases in which we file a joint SAR-SF for a transaction that has been handled both by us and by the clearing broker, we may share with the clearing broker a copy of the filed SAR-SF.
If we determine it is appropriate to jointly file a SAR-SF, we understand that we cannot disclose that we have filed a SAR-SF to any financial institution except the financial institution that is filing jointly. If we determine it is not appropriate to file jointly (e.g., because the SAR-SF concerns the other broker-dealer or one of its employees), we understand that we cannot disclose that we have filed a SAR-SF to any other financial institution or insurance company.
f. Checking the Office of Foreign Assets Control Listings
Before opening an account, and on an ongoing basis, Zhenhao Fei will check to ensure that a customer does not appear on the SDN list or is not engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC. (See the OFAC Web site for the SDN list and listings of current sanctions and embargoes). Because the SDN list and listings of economic sanctions and embargoes are updated frequently, we will consult them on a regular basis and subscribe to receive any available updates when they occur. With respect to the SDN list, we may also access that list through various software programs to ensure speed and accuracy. Zhenhao Fei will also review existing accounts against the SDN list and listings of current sanctions and embargoes when they are updated and he will document the review.
If we determine that a customer is on the SDN list or is engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC, we will reject the transaction and/or block the customer’s assets and file a blocked assets and/or rejected transaction form with OFAC within 10 days. We will also call the OFAC Hotline at (800) 540-6322 immediately.
Our review will include customer accounts, transactions involving customers (including activity that passes through the firm such as wires) and the review of customer transactions that involve physical security certificates or application-based investments (e.g., mutual funds).
5. Customer Identification Program
In addition to the information we must collect under FINRA Rule 2010 (Standards of Commercial Honor and Principles of Trade), NASD Rules 2310 (Recommendations to Customers – Suitability) and 3110 (Books and Records) and Securities Exchange Act of 1934 (Exchange Act) Rules 17a-3(a)(9) (Beneficial Ownership regarding Cash and Margin Accounts) and 17a-3(a)(17) (Customer Accounts), we have established, documented and maintained a written Customer Identification Program (CIP). We will collect certain minimum customer identification information from each customer who opens an account; utilize risk-based measures to verify the identity of each customer who opens an account; record customer identification information and the verification methods and results; provide the required adequate CIP notice to customers that we will seek identification information to verify their identities; and compare customer identification information with government-provided lists of suspected terrorists, once such lists have been issued by the government. See Section 5.g. (Notice to Customers) for additional information.
We will collect information to determine whether any entity opening an account would be excluded as a “customer,” pursuant to the exceptions outlined in 31 CFR 103.122(a)(4)(ii) (e.g., documentation of a company’s listing information, licensing or registration of a financial institution in the U.S, and status or verification of the authenticity of a government agency or department).
a. Required Customer Information
Prior to opening an account, Zhenhao Fei will collect the following information for all accounts, if applicable, for any person, entity or organization that is opening a new account and whose name is on the account:
(1) the name;
(2) date of birth (for an individual);
(3) an address, which will be a residential or business street address (for an individual), an Army Post Office (APO) or Fleet Post Office (FPO) box number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office, or other physical location (for a person other than an individual); and
(4) an identification number, which will be a taxpayer identification number (for U.S. persons), or one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard (for non-U.S. persons).
In the event that a customer has applied for, but has not received, a taxpayer identification number, we will make arrangements to confirm that the application was filed before the customer opens the account and to obtain the taxpayer identification number within a reasonable period of time after the account is opened.
When opening an account for a foreign business or enterprise that does not have an identification number, we will request alternative government-issued documentation certifying the existence of the business or enterprise.
b. Customers Who Refuse to Provide Information
If a potential or existing customer either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, our firm will not open a new account and, after considering the risks involved, consider closing any existing account. In either case, our AML Compliance Person will be notified so that we can determine whether we should report the situation to FinCEN on a SAR-SF.
c. Verifying Information
Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our customers by using risk-based procedures to verify and document the accuracy of the information we get about our customers. Zhenhao Fei will analyze the information we obtain to determine whether the information is sufficient to form a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).
We will verify customer identity through documentary means, non-documentary means or both. We will use documents to verify customer identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever necessary. We may also use non-documentary means, if we are still uncertain about whether we know the true identity of the customer. In verifying the information, we will consider whether the identifying information that we receive, such as the customer’s name, street address, zip code, telephone number (if provided), date of birth and Social Security number, allow us to determine that we have a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).
Appropriate documents for verifying the identity of customers include the following:
For an individual, an unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and
For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement or a trust instrument.
We understand that we are not required to take steps to determine whether the document that the customer has provided to us for identity verification has been validly issued and that we may rely on a government-issued identification as verification of a customer’s identity. If, however, we note that the document shows some obvious form of fraud, we must consider that factor in determining whether we can form a reasonable belief that we know the customer’s true identity.
We will use the following non-documentary methods of verifying identity:
Independently verifying the customer’s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database.
Checking references with other financial institutions; or
Obtaining a financial statement.
We will use non-documentary methods of verification when:
(1) the customer is unable to present an unexpired government-issued identification document with a photograph or other similar safeguard;
(2) the firm is unfamiliar with the documents the customer presents for identification verification;
(3) the customer and firm do not have face-to-face contact; and
(4) there are other circumstances that increase the risk that the firm will be unable to verify the true identity of the customer through documentary means.
We will verify the information within a reasonable time before or after the account is opened. Depending on the nature of the account and requested transactions, we may refuse to complete a transaction before we have verified the information, or in some instances when we need more time, we may, pending verification, restrict the types of transactions or dollar amount of transactions. If we find suspicious information that indicates possible money laundering, terrorist financing activity, or other suspicious activity, we will, after internal consultation with the firm’s AML Compliance Person, file a SAR-SF in accordance with applicable laws and regulations.
We recognize that the risk that we may not know the customer’s true identity may be heightened for certain types of accounts, such as an account opened in the name of a corporation, partnership or trust that is created or conducts substantial business in a jurisdiction that has been designated by the U.S. as a primary money laundering jurisdiction, a terrorist concern, or has been designated as a non-cooperative country or territory. We will identify customers that pose a heightened risk of not being properly identified. We will also take the following additional measures that may be used to obtain information about the identity of the individuals associated with the customer when standard documentary methods prove to be insufficient.
d. Lack of Verification
When we cannot form a reasonable belief that we know the true identity of a customer, we will do the following: (1) not open an account; (2) impose terms under which a customer may conduct transactions while we attempt to verify the customer’s identity; (3) close an account after attempts to verify customer’s identity fail; and (4) determine whether it is necessary to file a SAR-SF in accordance with applicable laws and regulations.
We will document our verification, including all identifying information provided by a customer, the methods used and results of verification, and the resolution of any discrepancies identified in the verification process. We will keep records containing a description of any document that we relied on to verify a customer’s identity, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to non-documentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a customer. We will also keep records containing a description of the resolution of each substantive discrepancy discovered when verifying the identifying information obtained. We will retain records of all identification information for five years after the account has been closed; we will retain records made about verification of the customer’s identity for five years after the record is made.
f. Comparison with Government-Provided Lists of Terrorists
At such time as we receive notice that a federal government agency has issued a list of known or suspected terrorists and identified the list as a list for CIP purposes, we will, within a reasonable period of time after an account is opened (or earlier, if required by another federal law or regulation or federal directive issued in connection with an applicable list), determine whether a customer appears on any such list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators. We will follow all federal directives issued in connection with such lists.
We will continue to comply separately with OFAC rules prohibiting transactions with certain foreign countries or their nationals.
g. Notice to Customers
FINRA has produced a Customer Identification Program Notice to assist firms in fulfilling this notification requirement. Please refer to FINRA’s AML Web page for further details.
We will provide notice to customers that the firm is requesting information from them to verify their identities, as required by federal law. We will use the following method to provide notice to customers: telephone and online.
Important Information About Procedures for Opening a New Account
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
h. Reliance on Another Financial Institution for Identity Verification
We may, under the following circumstances, rely on the performance by another financial institution (including an affiliate) of some or all of the elements of our CIP with respect to any customer that is opening an account or has established an account or similar business relationship with the other financial institution to provide or engage in services, dealings or other financial transactions:
when such reliance is reasonable under the circumstances;
when the other financial institution is subject to a rule implementing the anti-money laundering compliance program requirements of 31 U.S.C. § 5318(h), and is regulated by a federal functional regulator; and
when the other financial institution has entered into a contract with our firm requiring it to certify annually to us that it has implemented its anti-money laundering program and that it will perform (or its agent will perform) specified requirements of the customer identification program.
6. General Customer Due Diligence
It is important to our AML and SAR-SF reporting program that we obtain sufficient information about each customer to allow us to evaluate the risk presented by that customer and to detect and report suspicious activity. When we open an account for a customer, the due diligence we perform may be in addition to customer information obtained for purposes of our CIP.
For each account meeting the required criteria, we will take steps to obtain sufficient customer information to comply with our suspicious activity reporting requirements. Such information should include:
the customer’s business;
the customer’s anticipated account activity (both volume and type);
the source of the customer’s funds.
For accounts that we have deemed to be higher risk, we will obtain the following information:
the purpose of the account;
the source of funds and wealth;
the beneficial owners of the accounts;
the customer’s (or beneficial owner’s) occupation or type of business;
domicile (where the customer’s business is organized);
description of customer’s primary trade area and whether international transactions are expected to be routine;
description of the business operations and anticipated volume of trading;
explanations for any changes in account activity.
We will also ensure that the customer information remains accurate by thorough due diligence procedures.
7. Correspondent Accounts for Foreign Shell Banks
a. Detecting and Closing Correspondent Accounts of Foreign Shell Banks
We will identify foreign bank accounts and any such account that is a correspondent account (any account that is established for a foreign bank to receive deposits from, or to make payments or other disbursements on behalf of, the foreign bank, or to handle other financial transactions related to such foreign bank) for foreign shell banks by [describe procedure to detect such accounts]. Upon finding or suspecting such accounts, firm employees will notify the AML Compliance Person, who will terminate any verified correspondent account in the United States for a foreign shell bank. We will also terminate any correspondent account that we have determined is not maintained by a foreign shell bank but is being used to provide services to such a shell bank. We will exercise caution regarding liquidating positions in such accounts and take reasonable steps to ensure that no new positions are established in these accounts during the termination period. We will terminate any correspondent account for which we have not obtained the information described in Appendix A of the regulations regarding shell banks within the time periods specified in those regulations.
We will require our foreign bank account holders to identify the owners of the foreign bank if it is not publicly traded, the name and street address of a person who resides in the United States and is authorized and has agreed to act as agent for acceptance of legal process, and an assurance that the foreign bank is not a shell bank nor is it facilitating activity of a shell bank. In lieu of this information the foreign bank may submit the Certification Regarding Correspondent Accounts For Foreign Banks provided in the BSA regulations. We will re-certify when we believe that the information is no longer accurate or at least once every three years.
c. Recordkeeping for Correspondent Accounts for Foreign Banks
We will keep records identifying the owners of foreign banks with U.S. correspondent accounts and the name and address of the U.S. agent for service of legal process for those banks.
d. Summons or Subpoena of Foreign Bank Records; Termination of Correspondent Relationships with Foreign Bank
When we receive a written request from a federal law enforcement officer for information identifying the non-publicly traded owners of any foreign bank for which we maintain a correspondent account in the United States and/or the name and address of a person residing in the United States who is an agent to accept service of legal process for a foreign bank’s correspondent account, we will provide that information to the requesting officer not later than seven days after receipt of the request. We will close, within 10 days, any correspondent account for a foreign bank that we learn from FinCEN or the Department of Justice has failed to comply with a summons or subpoena issued by the Secretary of the Treasury or the Attorney General of the United States or has failed to contest such a summons or subpoena. We will scrutinize any correspondent account activity during that 10-day period to ensure that any suspicious activity is appropriately reported and to ensure that no new positions are established in these correspondent accounts.
8. Due Diligence and Enhanced Due Diligence Requirements for Correspondent Accounts of Foreign Financial Institutions
a. Due Diligence for Correspondent Accounts of Foreign Financial Institutions
We will conduct an inquiry to determine whether a foreign financial institution has a correspondent account established, maintained, administered or managed by the firm.
If we have correspondent accounts for foreign financial institutions, we will assess the money laundering risk posed, based on a consideration of relevant risk factors. We can apply all or a subset of these risk factors depending on the nature of the foreign financial institutions and the relative money laundering risk posed by such institutions.
The relevant risk factors can include:
the nature of the foreign financial institution’s business and the markets it serves;
the type, purpose and anticipated activity of such correspondent account;
the nature and duration of the firm’s relationship with the foreign financial institution and its affiliates;
the anti-money laundering and supervisory regime of the jurisdiction that issued the foreign financial institution’s charter or license and, to the extent reasonably available, the jurisdiction in which any company that is an owner of the foreign financial institution is incorporated or chartered; and
information known or reasonably available to the covered financial institution about the foreign financial institution’s anti-money laundering record.
In addition, our due diligence program will consider additional factors that have not been enumerated above when assessing foreign financial institutions that pose a higher risk of money laundering.
We will apply our risk-based due diligence procedures and controls to each financial foreign institution correspondent account on an ongoing basis. This includes periodically reviewing the activity of each foreign financial institution correspondent sufficient to ensure whether the nature and volume of account activity is generally consistent with the information regarding the purpose and expected account activity and to ensure that the firm can adequately identify suspicious transactions. Ordinarily, we will not conduct this periodic review by scrutinizing every transaction taking place within the account. One procedure we may use instead is to use any account profiles for our correspondent accounts (to the extent we maintain these) that we ordinarily use to anticipate how the account might be used and the expected volume of activity to help establish baselines for detecting unusual activity.
b. Enhanced Due Diligence
We will assess any correspondent accounts for foreign financial institutions to determine whether they are correspondent accounts that have been established, maintained, administered or managed for any foreign bank that operates under:
(1) an offshore banking license;
(2) a banking license issued by a foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the U.S. representative to the group or organization concurs; or
(3) a banking license issued by a foreign country that has been designated by the Secretary of the Treasury as warranting special measures due to money laundering concerns.
If we determine that we have any correspondent accounts for these specified foreign banks, we will perform enhanced due diligence on these correspondent accounts. The enhanced due diligence that we will perform for each correspondent account will include, at a minimum, procedures to take reasonable steps to:
(1) conduct enhanced scrutiny of the correspondent account to guard against money laundering and to identify and report any suspicious transactions. Such scrutiny will not only reflect the risk assessment that is described in Section 8.a. above, but will also include procedures to, as appropriate:
(i) obtain (e.g., using a questionnaire) and consider information related to the foreign bank’s AML program to assess the extent to which the foreign bank’s correspondent account may expose us to any risk of money laundering;
(ii) monitor transactions to, from or through the correspondent account in a manner reasonably designed to detect money laundering and suspicious activity (this monitoring may be conducted manually or electronically and may be done on an individual account basis or by product activity); and
(iii) obtain information from the foreign bank about the identity of any person with authority to direct transactions through any correspondent account that is a payable-through account (a correspondent account maintained for a foreign bank through which the foreign bank permits its customer to engage, either directly or through a subaccount, in banking activities) and the sources and beneficial owners of funds or other assets in the payable-through account.
(2) determine whether the foreign bank maintains correspondent accounts for other foreign banks that enable those other foreign banks to gain access to the correspondent account under review and, if so, to take reasonable steps to obtain information to assess and mitigate the money laundering risks associated with such accounts, including, as appropriate, the identity of those other foreign banks; and
(3) if the foreign bank’s shares are not publicly traded, determine the identity of each owner and the nature and extent of each owner’s ownership interest. We understand that for purposes of determining a private foreign bank’s ownership, an “owner” is any person who directly or indirectly owns, controls or has the power to vote 10 percent or more of any class of securities of a foreign bank. We also understand that members of the same family shall be considered to be one person.
c. Special Procedures When Due Diligence or Enhanced Due Diligence Cannot Be Performed
In the event there are circumstances in which we cannot perform appropriate due diligence with respect to a correspondent account, we will determine, at a minimum, whether to refuse to open the account, suspend transaction activity, file a SAR-SF, close the correspondent account and/or take other appropriate action.
9. Due Diligence and Enhanced Due Diligence Requirements for Private Banking Accounts/Senior Foreign Political Figures
We will review our accounts to determine whether we offer any private banking accounts and we will conduct due diligence on such accounts. This due diligence will include, at least, (1) ascertaining the identity of all nominal holders and holders of any beneficial ownership interest in the account (including information on those holders’ lines of business and sources of wealth); (2) ascertaining the source of funds deposited into the account; (3) ascertaining whether any such holder may be a senior foreign political figure; and (4) detecting and reporting, in accordance with applicable laws and regulations, any known or suspected money laundering, or use of the proceeds of foreign corruption.
We will review public information, including information available in Internet databases, to determine whether any private banking account holders are senior foreign political figures. If we discover information indicating that a particular private banking account holder may be a senior foreign political figure, and upon taking additional reasonable steps to confirm this information, we determine that the individual is, in fact, a senior foreign political figure, we will conduct additional enhanced due diligence to detect and report transactions that may involve money laundering or the proceeds of foreign corruption.
In so doing, we will consider the risks that the funds in the account may be the proceeds of foreign corruption by determining the purpose and use of the private banking account, location of the account holder(s), source of funds in the account, type of transactions conducted through the account and jurisdictions involved in such transactions. The degree of scrutiny we will apply will depend on various risk factors, including, but not limited to, whether the jurisdiction the senior foreign political figure is from is one in which current or former political figures have been implicated in corruption and the length of time that a former political figure was in office. Our enhanced due diligence might include, depending on the risk factors, probing the account holder’s employment history, scrutinizing the account holder’s source(s) of funds, and monitoring transactions to the extent necessary to detect and report proceeds of foreign corruption, and reviewing monies coming from government, government controlled or government enterprise accounts (beyond salary amounts).
If we do not find information indicating that a private banking account holder is a senior foreign political figure, and the account holder states that he or she is not a senior foreign political figure, then we may make an assessment if a higher risk for money laundering, nevertheless, exists independent of the classification. If a higher risk is apparent, we will consider additional due diligence measures such as [describe in detail the additional measures].
In either case, if due diligence (or the required enhanced due diligence, if the account holder is a senior foreign political figure) cannot be performed adequately, we will, after consultation with the firm’s AML Compliance Person and, as appropriate, not open the account, suspend the transaction activity, file a SAR-SF or close the account.
10. Compliance with FinCEN’s Issuance of Special Measures Against Foreign Jurisdictions, Financial Institutions or International Transactions of Primary Money Laundering Concern
If FinCEN issues a final rule imposing a special measure against one or more foreign jurisdictions or financial institutions, classes of international transactions or types of accounts deeming them to be of primary money laundering concern, we understand that we must read FinCEN’s final rule and follow any prescriptions or prohibitions contained in that rule. For example, if the final rule deems a certain bank and its subsidiaries (Specified Bank) to be of primary money laundering concerns, a special measure may be a prohibition from opening or maintaining a correspondent account in the United States for, or on behalf of, the Specified Banks. In that case, we will take the following steps:
(1) We will review our account records, including correspondent account records, to ensure that our accountholders and correspondent accountholders maintain no accounts directly for, or on behalf of, the Specified Banks; and
(2) We will apply due diligence procedures to our correspondent accounts that are reasonably designed to guard against indirect use of those accounts by the Specified Banks. Such due diligence may include:
• Notification to Correspondent Accountholders
We will notify our correspondent accountholders that the account may not be used to provide the Specified Banks with access to us.
We will transmit the notice to our correspondent accounts using the following method, and we shall retain documentation of such notice.
• Identification of Indirect Use
We will take reasonable steps in order to identify any indirect use of our correspondent accounts by the Specified Banks. We will determine if such indirect use is occurring from transactional records that we maintain in the normal course of business. We will take a risk-based approach when deciding what, if any, additional due diligence measures we should adopt to guard against the indirect use of correspondent accounts by the Specified Banks, based on risk factors such as the type of services offered by, and geographic locations of, their correspondents.
We understand that we have an ongoing obligation to take reasonable steps to identify all correspondent account services our correspondent accountholders may directly or indirectly provide to the Specified Banks.
11. Monitoring Accounts for Suspicious Activity
We will monitor account activity for unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to our business. (Red flags are identified in Section 11.b. below.) The AML Compliance Person or his or her designee With the approval of Zhenhao Fei will be responsible for this monitoring, will review any activity that our monitoring system detects, will determine whether any additional steps are required, will document when and how this monitoring is carried out, and will report suspicious activities to the appropriate authorities.
We will conduct reviews of activity that our monitoring system detects. We will document our monitoring and reviews. The AML Compliance Person or his or her designee will conduct an appropriate investigation and review relevant information from internal or third-party sources before a SAR-SF is filed.
Rules: 31 C.F.R. §103.19; FINRA Rule 3310(a).
a. Emergency Notification to Law Enforcement by Telephone
In situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, we will immediately call an appropriate law enforcement authority. If a customer or company appears on OFAC’s SDN list, we will call the OFAC Hotline at (800) 540-6322. Other contact numbers we will use are: FinCEN’s Financial Institutions Hotline ((866) 556-3974) (especially to report transactions relating to terrorist activity), local U.S. Attorney’s office, local FBI office and local SEC office (to voluntarily report such violations to the SEC in addition to contacting the appropriate law enforcement authority). If we notify the appropriate law enforcement authority of any such activity, we must still file a timely SAR-SF.
Although we are not required to, in cases where we have filed a SAR-SF that may require immediate attention by the SEC, we may contact the SEC via the SEC SAR Alert Message Line at (202) 551-SARS (7277) to alert the SEC about the filing. We understand that calling the SEC SAR Alert Message Line does not alleviate our obligations to file a SAR-SF or notify an appropriate law enforcement authority.
Rule: 31 C.F.R. § 103.19.
Resources: FinCEN’s Web site; OFAC Web page; NTM 02-21; NTM 02-47.
b. Red Flags
Red flags that signal possible money laundering or terrorist financing include, but are not limited to:
Customers – Insufficient or Suspicious Information
• Provides unusual or suspicious identification documents that cannot be readily verified.
• Reluctant to provide complete information about nature and purpose of business, prior banking relationships, anticipated account activity, officers and directors or business location.
• Refuses to identify a legitimate source for funds or information is false, misleading or substantially incorrect.
• Background is questionable or differs from expectations based on business activities.
• Customer with no discernable reason for using the firm’s service.
Efforts to Avoid Reporting and Recordkeeping
• Reluctant to provide information needed to file reports or fails to proceed with transaction.
• Tries to persuade an employee not to file required reports or not to maintain required records.
• “Structures” deposits, withdrawals or purchase of monetary instruments below a certain amount to avoid reporting or recordkeeping requirements.
• Unusual concern with the firm’s compliance with government reporting requirements and firm’s AML policies.
Certain Funds Transfer Activities
• Wire transfers to/from financial secrecy havens or high-risk geographic location without an apparent business reason.
• Many small, incoming wire transfers or deposits made using checks and money orders. Almost immediately withdrawn or wired out in manner inconsistent with customer’s business or history. May indicate a Ponzi scheme.
• Wire activity that is unexplained, repetitive, unusually large or shows unusual patterns or with no apparent business purpose.
Certain Deposits or Dispositions of Physical Certificates
• Physical certificate is titled differently than the account.
• Physical certificate does not bear a restrictive legend, but based on history of the stock and/or volume of shares trading, it should have such a legend.
• Customer’s explanation of how he or she acquired the certificate does not make sense or changes.
• Customer deposits the certificate with a request to journal the shares to multiple accounts, or to sell or otherwise transfer ownership of the shares.
Certain Securities Transactions
• Customer engages in prearranged or other non-competitive trading, including wash or cross trades of illiquid securities.
• Two or more accounts trade an illiquid stock suddenly and simultaneously.
• Customer journals securities between unrelated accounts for no apparent business reason.
• Customer has opened multiple accounts with the same beneficial owners or controlling parties for no apparent business reason.
•. Customer transactions include a pattern of receiving stock in physical form or the incoming transfer of shares, selling the position and wiring out proceeds.
• Customer’s trading patterns suggest that he or she may have inside information.
Transactions Involving Penny Stock Companies
• Company has no business, no revenues and no product.
• Company has experienced frequent or continuous changes in its business structure.
• Officers or insiders of the issuer are associated with multiple penny stock issuers.
• Company undergoes frequent material changes in business strategy or its line of business.
• Officers or insiders of the issuer have a history of securities violations.
• Company has not made disclosures in SEC or other regulatory filings.
• Company has been the subject of a prior trading suspension.
Transactions Involving Insurance Products
• Cancels an insurance contract and directs funds to a third party.
• Structures withdrawals of funds following deposits of insurance annuity checks signaling an effort to avoid BSA reporting requirements.
• Rapidly withdraws funds shortly after a deposit of a large insurance check when the purpose of the fund withdrawal cannot be determined.
• Cancels annuity products within the free look period which, although could be legitimate, may signal a method of laundering funds if accompanied with other suspicious indicia.
• Opens and closes accounts with one insurance company then reopens a new account shortly thereafter with the same insurance company, each time with new ownership information.
• Purchases an insurance product with no concern for investment objective or performance.
• Purchases an insurance product with unknown or unverifiable sources of funds, such as cash, official checks or sequentially numbered money orders.
Activity Inconsistent With Business
• Transactions patterns show a sudden change inconsistent with normal activities.
• Unusual transfers of funds or journal entries among accounts without any apparent business purpose.
• Maintains multiple accounts, or maintains accounts in the names of family members or corporate entities with no apparent business or other purpose.
• Appears to be acting as an agent for an undisclosed principal, but is reluctant to provide information.
Other Suspicious Customer Activity
• Unexplained high level of account activity with very low levels of securities transactions.
• Funds deposits for purchase of a long-term investment followed shortly by a request to liquidate the position and transfer the proceeds out of the account.
• Law enforcement subpoenas.
• Large numbers of securities transactions across a number of jurisdictions.
• Buying and selling securities with no purpose or in unusual circumstances (e.g., churning at customer’s request).
• Payment by third-party check or money transfer without an apparent connection to the customer.
• Payments to third-party without apparent connection to customer.
• No concern regarding the cost of transactions or fees (i.e., surrender fees, higher than necessary commissions, etc.).
c. Responding to Red Flags and Suspicious Activity
When an employee of the firm detects any red flag, or other activity that may be suspicious, he or she will notify relevant entities Under the direction of the AML Compliance Person, the firm will determine whether or not and how to further investigate the matter. This may include gathering additional information internally or from third-party sources, contacting the government, freezing the account and/or filing a SAR-SF.
12. Suspicious Transactions and BSA Reporting
a. Filing a SAR-SF
We will file SAR-SFs with FinCEN for any transactions (including deposits and transfers) conducted or attempted by, at or through our firm involving $5,000 or more of funds or assets (either individually or in the aggregate) where we know, suspect or have reason to suspect:
(1) the transaction involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation;
(2) the transaction is designed, whether through structuring or otherwise, to evade any requirements of the BSA regulations;
(3) the transaction has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and after examining the background, possible purpose of the transaction and other facts, we know of no reasonable explanation for the transaction; or
(4) the transaction involves the use of the firm to facilitate criminal activity.
We will also file a SAR-SF and notify the appropriate law enforcement authority in situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes. In addition, although we are not required to, we may contact that SEC in cases where a SAR-SF we have filed may require immediate attention by the SEC. See Section 11 for contact numbers. We also understand that, even if we notify a regulator of a violation, unless it is specifically covered by one of the exceptions in the SAR rule, we must file a SAR-SF reporting the violation.
We may file a voluntary SAR-SF for any suspicious transaction that we believe is relevant to the possible violation of any law or regulation but that is not required to be reported by us under the SAR rule. It is our policy that all SAR-SFs will be reported regularly to the Board of Directors and appropriate senior management, with a clear reminder of the need to maintain the confidentiality of the SAR-SF.
We will report suspicious transactions by completing a SAR-SF, and we will collect and maintain supporting documentation as required by the BSA regulations. We will file a SAR-SF no later than 30 calendar days after the date of the initial detection of the facts that constitute a basis for filing a SAR-SF. If no suspect is identified on the date of initial detection, we may delay filing the SAR-SF for an additional 30 calendar days pending identification of a suspect, but in no case will the reporting be delayed more than 60 calendar days after the date of initial detection. The phrase “initial detection” does not mean the moment a transaction is highlighted for review. The 30-day (or 60-day) period begins when an appropriate review is conducted and a determination is made that the transaction under review is “suspicious” within the meaning of the SAR requirements. A review must be initiated promptly upon identification of unusual activity that warrants investigation.
We will retain copies of any SAR-SF filed and the original or business record equivalent of any supporting documentation for five years from the date of filing the SAR-SF. We will identify and maintain supporting documentation and make such information available to FinCEN, any other appropriate law enforcement agencies, federal or state securities regulators or SROs upon request.
We will not notify any person involved in the transaction that the transaction has been reported, except as permitted by the BSA regulations. We understand that anyone who is subpoenaed or required to disclose a SAR-SF or the information contained in the SAR-SF will, except where disclosure is requested by FinCEN, the SEC, or another appropriate law enforcement or regulatory agency, or an SRO registered with the SEC, decline to produce the SAR-SF or to provide any information that would disclose that a SAR-SF was prepared or filed. We will notify FinCEN of any such request and our response.
Rules: 31 C.F.R. §103.19, FINRA Rule 3310(a).
Resources: FinCEN’s Web site contains additional information, including information on the BSA E-Filing System, the SAR-SF Form (fill-in version), and the biannual SAR Activity Reviews and SAR Bulletins, which discuss trends in suspicious reporting and give helpful tips. SAR Activity Review, Issue 10 (May 2006) (documentation of decision not to file a SAR; grand jury subpoenas and suspicious activity reporting, and commencement of 30-day time period to file a SAR); FinCEN SAR Narrative Guidance Package (11/2003), FinCEN Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting (10/10/2007);NTM 02-21; NTM 02-47.
b. Foreign Bank and Financial Accounts Reports
We will file a FBAR with the IRS for any financial accounts of more than $10,000 that we hold, or for which we have signature or other authority over, in a foreign country. We will use the FBAR Form provided on the IRS’s Web site.
Rule: 31 C.F.R. §103.24.
Resource: FBAR Form.
e. Monetary Instrument Purchases
When we issue or sell a bank check or draft, cashier’s check, money order or traveler’s check in the amounts of $3,000 to $10,000 inclusive, we will maintain records of the following information:
(a) (1) If the purchaser has a deposit account with us:
(i) (A) the name of the purchaser;
(B) the date of purchase;
(C) the type(s) of instrument(s) purchased;
(D) the serial number(s) of each of the instrument(s) purchased; and
(E) the amount in dollars of each of the instrument(s) purchased.
(ii) In addition, we must verify that the individual is a deposit accountholder or must verify the individual’s identity. Verification may be either through a signature card or other file or record provided the deposit accountholder’s name and address were verified previously and that information was recorded on the signature card or other file or record; or by examination of a document which is normally accepted as a means of identification when cashing checks for nonde positors and which contains the name and address of the purchaser. If the deposit accountholder’s identity has not been verified previously, we shall verify the deposit accountholder’s identity by examination of a document which is normally acceptable within the community as a means of identification when cashing checks for nonde position and which contains the name and address of the purchaser, and shall record the specific identifying information (e.g., driver’s license number and state of issuance).
(2) If the purchaser does not have a deposit account with us:
(i) (A) the name and address of the purchaser;
(B) the Social Security number of the purchaser, or if the purchaser is an alien and does not have a Social Security number, the alien identification number;
(C) the date of birth of the purchaser;
(D) the date of purchase;
(E) the type(s) of instrument(s) purchased;
(F) the serial number(s) of the instrument(s) purchased; and
(G) the amount in dollars of each of the instrument(s) purchased.
(ii) In addition, we shall verify the purchaser’s name and address by examination of a document which is normally acceptable within the community as a means of identification when cashing checks for nonde positors and which contains the name and address of the purchaser, and shall record the specific identifying information (e.g., driver’s license number and state of issuance).
(b) Contemporaneous purchases of the same or different types of instruments totaling $3,000 or more shall be treated as one purchase. Multiple purchases during one business day totaling $3,000 or more shall be treated as one purchase if an individual employee, director, officer or partner of the [Name of Firm] has knowledge that these purchases have occurred.
(c) We shall keep records required to be kept for a period of five years, and such records shall be made available to the federal and state authorities or SROs upon request at any time.
Rule: 31 C.F.R. § 103.29. See also 31 C.F.R. 103.22(b).
Resources: 52 Fed. Reg. 52250 (October 17, 1994) (Final Rule Amendments to BSA Regulations Relating to Identification Required to Purchase Bank Checks and Drafts, Cashier’s Checks, Money Orders, and Traveler’s Checks).
f. Funds Transmittals of $3,000 or More Under the Travel Rule
When we are the transmitter’s financial institution in funds of $3,000 or more, we will retain either the original or a copy (e.g., microfilm, electronic record) of the transmittal order. We will also record on the transmittal order the following information: (1) the name and address of the transmitter; (2) if the payment is ordered from an account, the account number; (3) the amount of the transmittal order; (4) the execution date of the transmittal order; and (5) the identity of the recipient’s financial institution. In addition, we will include on the transmittal order as many of the following items of information as are received with the transmittal order: (1) the name and address of the recipient; (2) the account number of the recipient; (3) any other specific identifier of the recipient; and (4) any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order.
We will also verify the identity of the person placing the transmittal order (if we are the transmitting firm), provided the transmittal order is placed in person and the transmittor is not an established customer of the firm (i.e., a customer of the firm who has not previously maintained an account with us or for whom we have not obtained and maintained a file with the customer’s name, address, taxpayer identification number, or, if none, alien identification number or passport number and country of issuance). If a transmittor or recipient is conducting business in person, we will obtain: (1) the person’s name and address; (2) the type of identification reviewed and the number of the identification document (e.g., driver’s license); and (3) the person’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record the lack thereof. If a transmittor or recipient is not conducting business in person, we shall obtain the person’s name, address, and a copy or record of the method of payment (e.g., check or credit card transaction). In the case of transmittors only, we shall also obtain the transmittor’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. In the case of recipients only, we shall obtain the name and address of the person to which the transmittal was sent.
Rule: 31 C.F.R. §103.33(f) and (g).
13. AML Recordkeeping
a. Responsibility for Required AML Records and SAR-SF Filing
Our AML Compliance Person and his or her designee will be responsible for ensuring that AML records are maintained properly and that SAR-SFs are filed as required.
In addition, as part of our AML program, our firm will create and maintain SAR-SFs, CTRs, CMIRs, FBARs, and relevant documentation on customer identity and verification (See Section 5 above) and funds transmittals. We will maintain SAR-SFs and their accompanying documentation for at least five years. We will keep other documents according to existing BSA and other recordkeeping requirements, including certain SEC rules that require six-year retention periods (e.g., Exchange Act Rule 17a-4(a) requiring firms to preserve for a period of not less than six years, all records required to be retained by Exchange Act Rule 17a-3(a)(1)-(3), (a)(5), and (a)(21)-(22) and Exchange Act Rule 17a-4(e)(5) requiring firms to retain for six years account record information required pursuant to Exchange Act Rule 17a-3(a)(17)).
Rules: 31 C.F.R. § 103.38, Exchange Act Rule 17a-8 (requiring registered broker-dealers subject to the Currency and Foreign Transactions Reporting Act of 1970 to comply with the BSA regulations regarding reporting, recordkeeping and record retention requirements), FINRA Rule 3310.
b. SAR-SF Maintenance and Confidentiality
We will hold SAR-SFs and any supporting documentation confidential. We will not inform anyone outside of FinCEN, the SEC, an SRO registered with the SEC or other appropriate law enforcement or regulatory agency about a SAR-SF. We will refuse any subpoena requests for SAR-SFs or for information that would disclose that a SAR-SF has been prepared or filed and immediately notify FinCEN of any such subpoena requests that we receive. See Section 11 for contact numbers. We will segregate SAR-SF filings and copies of supporting documentation from other firm books and records to avoid disclosing SAR-SF filings. Our AML Compliance Person will handle all subpoenas or other requests for SAR-SFs. [Describe any other retention or confidentiality procedures of your firm for SAR-SFs.] We may share information with another financial institution about suspicious transactions in order to determine whether we will jointly file a SAR according to the provisions of Section 3.d. In cases in which we file a joint SAR for a transaction that has been handled both by us and another financial institution, both financial institutions will maintain a copy of the filed SAR.
Rules: 31 C.F.R. §103.19(e); 67 Fed. Reg. 44048, 44054 (July 1, 2002).
Resources: NTM 02-47.
c. Additional Records
We shall retain either the original or a microfilm or other copy or reproduction of each of the following:
A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property. The record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof and the date thereof;
A record of each advice, request or instruction received or given regarding any transaction resulting (or intended to result and later canceled if such a record is normally made) in the transfer of currency or other monetary instruments, funds, checks, investment securities or credit, of more than $10,000 to or from any person, account or place outside the U.S.;
A record of each advice, request or instruction given to another financial institution (which includes broker-dealers) or other person located within or without the U.S., regarding a transaction intended to result in the transfer of funds, or of currency, other monetary instruments, checks, investment securities or credit, of more than $10,000 to a person, account or place outside the U.S.;
Each document granting signature or trading authority over each customer’s account;
Each record described in Exchange Act Rule 17a-3(a): (1) (blotters), (2) (ledgers for assets and liabilities, income, and expense and capital accounts), (3) (ledgers for cash and margin accounts), (4) (securities log), (5) (ledgers for securities in transfer, dividends and interest received, and securities borrowed and loaned), (6) (order tickets), (7) (purchase and sale tickets), (8) (confirms), and (9) (identity of owners of cash and margin accounts);
A record of each remittance or transfer of funds, or of currency, checks, other monetary instruments, investment securities or credit, of more than $10,000 to a person, account or place, outside the U.S.; and
A record of each receipt of currency, other monetary instruments, checks or investment securities and of each transfer of funds or credit, of more than $10,000 received on any one occasion directly and not through a domestic financial institution, from any person, account or place outside the U.S.
Rules: 31 C.F.R. §§ 103.33, 103.35(b).
14. Clearing/Introducing Firm Relationships
We will work closely with our clearing firm to detect money laundering. We will exchange information, records, data and exception reports as necessary to comply [with our contractual obligations and] with AML laws. Both our firm and our clearing firm have filed (and kept updated) the necessary annual certifications for such information sharing, which can be found on FinCEN’s Web site. As a general matter, we will obtain and use the exception reports offered by our clearing firm in order to monitor customer activity and we will provide our clearing firm with proper customer identification and due diligence information as required to successfully monitor customer transactions. We have discussed how each firm will apportion customer and transaction functions and how we will share information and set forth our understanding in a written document. We understand that the apportionment of functions will not relieve either of us from our independent obligation to comply with AML laws, except as specifically allowed under the BSA and its implementing regulations.
Rules: 31 CFR 103.110; FINRA Rule 3310, NASD Rule 3230.
Resources: FIN-2006-G003: Frequently Asked Questions: Foreign Bank Recertifications under 31 C.F.R. § 103.77 (February 3, 2006).
15. Training Programs
We will develop ongoing employee training under the leadership of the AML Compliance Person and senior management. Our training will occur on at least an annual basis. It will be based on our firm’s size, its customer base, and its resources and be updated as necessary to reflect any new developments in the law.
Our training will include, at a minimum: (1) how to identify red flags and signs of money laundering that arise during the course of the employees’ duties; (2) what to do once the risk is identified (including how, when and to whom to escalate unusual customer activity or other red flags for analysis and, where appropriate, the filing of SAR-SFs); (3) what employees’ roles are in the firm’s compliance efforts and how to perform them; (4) the firm’s record retention policy; and (5) the disciplinary consequences (including civil and criminal penalties) for non-compliance with the BSA.
We will develop training in our firm, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures and explanatory memos. We will maintain records to show the persons trained, the dates of training and the subject matter of their training.
We will review our operations to see if certain employees, such as those in compliance, margin and corporate security, require specialized additional training. Our written procedures will be updated to reflect any such changes.
Rule: FINRA Rule 3310.
Resources: See NTM 02-21, FinCEN SAR Narrative Guidance Package (11/2003), FinCEN Suggestions for Addressing Common Errors Noted in Suspicious Activity Reporting (10/10/2007).
16. Program to Independently Test AML Program
The testing of our AML program will be performed at least annually (on a calendar year basis) by an independent third party. We will evaluate the qualifications of the independent third party to ensure they have a working knowledge of applicable requirements under the BSA and its implementing regulations. Independent testing will be performed more frequently if circumstances warrant.
Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.
Resource: NTM 06-07.
b. Evaluation and Reporting
After we have completed the independent testing, staff will report its findings to senior management. We will promptly address each of the resulting recommendations and keep a record of how each noted deficiency was resolved.
Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.
17. Monitoring Employee Conduct and Accounts
We will subject employee accounts to the same AML procedures as customer accounts, under the supervision of the AML Compliance Person. We will also review the AML performance of supervisors, as part of their annual performance review. The AML Compliance Person’s accounts will be reviewed by Yale ReiSoleil.
Rules: 31 C.F.R. §§ 103.19, 103.120; FINRA Rule 3310.
18. Confidential Reporting of AML Non-Compliance
Employees will promptly report any potential violations of the firm’s AML compliance program to the AML Compliance Person, unless the violations implicate the AML Compliance Person, in which case the employee shall report to Yale ReiSoleil. Such reports will be confidential, and the employee will suffer no retaliation for making them.
Rules: 31 C.F.R. § 103.120; FINRA Rule 3310.
19. Additional Risk Areas
The firm has reviewed all areas of its business to identify potential money laundering risks that may not be covered in the procedures described above.