Notice
Comments FINRA is issuing this Notice to provide guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310 (Anti-Money Laundering Compliance Program). Questions concerning this Notice should be directed to: FINRA Rule 3310 (Anti-Money Laundering Compliance Program) requires each member firm to develop and implement a written anti-money laundering (AML) program reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act
(BSA),1 and the implementing regulations promulgated thereunder by the Department of the Treasury (Treasury). FINRA Rule 3310(a) requires firms to “[e]stablish and implement policies and procedures that can be reasonably expected to detect and cause the reporting of transactions required under [the BSA] and the implementing regulation thereunder.” The BSA authorizes Treasury to require that financial institutions file suspicious activity reports (SARs).2 Under
Treasury’s SAR rule,3 a broker-dealer must report a transaction to the Financial Crimes Enforcement Network (FinCEN) if it is conducted or attempted by, at or through a broker-dealer, it involves or aggregates funds or other assets of at least $5,000, and the broker-dealer knows, suspects or has reason to suspect that the transaction (or a pattern of transactions of which the transaction is a part): Broker-dealers must report the suspicious activity by completing a SAR and filing it in accordance with the requirements of
Treasury’s SAR rule.5 Broker-dealers must maintain a copy of any SAR filed and supporting documentation for a period of five years from the date of filing the SAR.6 FinCEN has provided guidance7 to the industry advising that if the activity that was the subject of a SAR filing continues, firms should review any continuing activity at least every 90 days to consider whether a continuing activity SAR filing is warranted, with the filing deadline being 120 days
after the date of the previously related SAR filing. In situations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, broker-dealers must immediately notify by telephone an appropriate law enforcement authority in addition to filing timely a SAR. The firm may call FinCEN’s Hotline at (866) 556-3974. Money Laundering Red FlagsFINRA published a list of “money laundering red flags” in Notice to Members 02-21 (NTM 02-21). Since NTM 02-21 was published, guidance detailing additional red flags that may be applicable to the securities industry have been published by a number of U.S. government agencies and international organizations.8 FINRA is issuing this Notice to provide examples of these additional money laundering red flags for firms to consider incorporating into their AML programs, as may be appropriate in implementing a risk-based approach to BSA/AML compliance. This could include, as applicable, incorporation into policies and procedures relating to suspicious activity monitoring or suspicious activity investigation 2 Regulatory Notice 19-18 May 6, 2019 and SAR reporting. Upon detection of red flags through monitoring, firms should consider whether additional investigation, customer due diligence measures or a SAR filing may be warranted. The following is not an exhaustive list and does not guarantee compliance with AML program requirements or provide a safe harbor from regulatory responsibility. Further, it is important to note that a red flag is not necessarily indicative of suspicious activity, and that not every item identified in this Notice will be relevant for every broker-dealer, every customer relationship or every business activity. Firms should also be aware of emerging areas of risk, such as risks associated with activity in digital assets. Regardless of whether such assets are securities, BSA/AML requirements, including SAR filing requirements apply, and firms should thus consider the relevant risks, monitor for suspicious activity and, as applicable, report any such activity. This Notice is intended to assist broker-dealers in complying with their existing obligations under BSA/AML requirements and does not create any new requirements or expectations. In addition, this Notice incorporates the red flags listed in NTM 02-21 so that firms can refer to this Notice only for examples of potential red flags. I. Potential Red Flags in Customer Due Diligence and Interactions With Customers
II. Potential Red Flags in Deposits of Securities
III. Potential Red Flags in Securities Trading13
IV. Potential Red Flags in Money Movements
V. Potential Red Flags in Insurance Products
VI. Other Potential Red Flags
Endnotes
Which of the following is an example of a red flag '?For example: The address or phone number matches that provided on a fraudulent application. The address is fake, a mail drop, or a prison. The phone number is invalid or that of a pager or answering service.
Which of the following might be a red flag that indicates the customer is possibly involved in money laundering?Unusual transactions, discrepancies in the customer due diligence process, frequent transfers from accounts without logical explanations, VA-fiat conversion or vice versa, transactions from sanctioned locations, and multiple accounts of the same customer are some of the red flags shared by FATF.
Which of the following might be considered a red flag under fincen rules?Some examples of "red flags" include, but are not limited to, the following: the purchase of an insurance product inconsistent with the customer's needs; unusual payment methods, such as cash, cash equivalents (when such a usage of cash or cash equivalents is, in fact, unusual), or structured monetary instruments; ...
What is a red flag in banking?Red Flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft. For example, if a customer has to provide some form of identification to open an account with your company, an ID that doesn't look genuine is a “red flag” for your business.
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