ANTI-MONEY LAUNDERING

COMPLIANCE PROGRAM

FCM TRAINING

Stages of Money Laundering

• Placement

• Layering

• Integration

Anti-Money Laundering Program Rule 2-9(c)

• Policies, Procedures and Internal Controls

• Designated Compliance Officer

• Ongoing Training

• Independent Audit Function

Policy Statement

• Committed to following all laws and regulations

• Committed to not being used as part of money laundering scheme

Identification and Verification

• Verify the identity of the customer

• Learn the nature of customer’s business

• Learn intended purpose of customer’s transactions

Required Minimum Information

• Name and Address (or business location)

• U.S Persons:– SSN or TIN

• Non-U.S. Persons:– Passport number

Verifying Documents

• Driver’s license

• State I.D. Card

• Utility bills

• Business incorporation records

• Business license

• Partnership agreements

OFAC’s Lists

• Sanctioned Countries:– Need to check if you can do business

• Specially Designated Nationals and Blocked Persons– May not do business and must report immediately

FCM/IB Allocation

• Allocation must be in writing

• Identify who is doing what

• Must have reasonable basis to believe other entity is fulfilling its function

Omnibus/Pool Accounts

• If there is no relationship with underlying customer, FCM must conduct risk-based due diligence on the intermediary

• FCM generally not required to do due diligence on underlying customer/ participant

Regulated Foreign Intermediaries

• Is the intermediary located in a FATF member country?

• What is your past experience with the intermediary?

• What is the intermediary’s business reputation?

Verification Requirements

• Effective October 26, 2002

• Verify identity to extent reasonable and practicable

• Maintain records used to verify identity

• Consult lists of known or suspected terrorists or terrorist organizations

Definition:Suspicious Transaction

• A transaction that has no business or apparent lawful purpose, is unusual for the customer, or lacks any reasonable explanation.

Red Flags

• Structuring

• Evasiveness about identity

• Trading with little or no risk

• Wire transfers to or from high risk countries

Reporting

• DSRO

• FinCEN

Qualified Staff

• Must be trained

• May want to do background checks

• Make sure logical division of duties

Recordkeeping

• Types of records

• Location or records

• Period of retention

Designated Compliance Officer

• Can be a specific person or a department

• Can also be responsible for other compliance functions

• No need to be a principal or Associate Member

• Must be independent of areas overseen

Compliance Officer Responsibilities

• Ensure firm has adequate customer identification and verification procedures

• Ensure firm has adequate guidelines for monitoring and reporting suspicious activities

• Receive reports of suspicious activities

Compliance Officer Responsibilities

• Gather relevant information to analyze and investigate

• Determine whether there is any further reporting obligation

• Ensure recordkeeping procedures are adequate

Training

• Formalized program is not required

• Goal is to provide appropriate personnel with information to carry out AML program

• Must be provided to appropriate personnel at least annually

Content Of Training

• Highlight red flags

• Monitoring for red flags

• How to handle suspicious activity

• Review of any firm experiences

• Recordkeeping policies

Training Methods

• Firm Manual

• Video Presentation

• Seminar with hypothetical situations

• Periodic written updates

Independent Audit Function

• Can be done by internal employees or outside party

• Internal employees should be independent of the functional areas

• Outside party should have experience

Independent Audit Function

• Must be conducted at least annually

• Results must be documented and reported

Hypotheticals

Suspicious Activity Reports

• Not currently required of FCMs, but Treasury is expected to require from FCMs

• Implementing regulations will probably require that these reports be filed under certain circumstances

Suspicious Activity Reports

• Currently, FCMs can file these reports voluntarily

• FCM is protected from liability for disclosures reported on SAR

Information Sharing with Law Enforcement Agencies

• Sharing with law enforcement agencies includes FCMs

• Practically, FCMs will probably not be effected by this until they are required to file SARs

• Provides immunity for liability under the FRPA

Information Sharing Among Financial Institutions

• Currently does not include FCMs in the definition

• FCMs would not be covered by the safe harbor

NFA’s Focus on Members’ Anti-Money Laundering Program

• Proper procedures

• Adequate internal controls

• Adhering to procedures

Anti-Money Laundry Procedures and Policy Statement

• Written procedures and policy statement

• Procedures – Detecting– Handling– Reporting

• Policy Statement– Consequences

Separation of Duties

• New accounts

• Customer funds

• Review and approve anti-money laundering procedures

• Compliance with anti-money laundering procedures

Separation of Duties

• Annual audit of anti-money laundering program

• Receives audit report

• Monitor customer accounts

• Investigating suspicious activity

• Senior management

Customer Account Documentation

• SSN or taxpayer ID

• Passport or other valid ID

• Principal place of business

• Nature of business

• Intended purpose of trading

• Documents used to verify

High Risk Accounts

• How are accounts identified

• What lists are used to identify

Suspicious Activity

• Review

• Investigate

• Reporting

• Firm management

• DSRO or FinCen

Training Material

• Outline

• Videos

• Written

Supervision of IBs

• Written agreement

• Allocation of responsibilities

• Due diligence by FCM

Questions?