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FINRA Warns BDs of Impending AML Rule Compliance Deadline

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The Financial Industry Regulatory Authority is reminding broker-dealers about the pending May compliance deadline for the self-regulator’s Anti-Money Laundering Compliance Program Rule 3310.

In just-released Regulatory Notice 17-40, FINRA notes the Treasury Department’s Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule), which became effective July 11, 2016, and reminds broker-dealers that they must be in compliance with FINRA’s Rule 3310 provisions by May 11, 2018.

(Related: FINRA’s 5 Biggest Fine Categories in 2016)

FinCEN’s CDD Rule “does not change the requirements of FINRA Rule 3310, and member firms must continue to comply with its requirements,” FINRA warns.

Current Bank Secrecy Act rules require financial institutions, including broker-dealers, to develop and implement anti-money laundering programs that meet “four pillars.” These four pillars require BDs to have written AML programs that include:

  • policies, procedures and internal controls reasonably designed to achieve compliance with the applicable provisions of the BSA and implementing regulations;
  • independent testing for compliance by broker-dealer personnel or a qualified outside party;
  • designation of an individual or individuals responsible for implementing and monitoring the operations and internal controls of the AML program; and
  • ongoing training for appropriate persons.

However, the aforementioned “ongoing customer due diligence” does not include the “fifth pillar” as set out by FinCEN’s CDD Rule, which amends the minimum statutory requirements for member firms’ AML programs by requiring such programs to include “risk-based procedures for conducting ongoing customer due diligence,” FINRA states.

The “fifth pillar” required for AML programs, includes: understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information, FINRA explains. 

FinCEN published a proposed rule on Sept. 1, 2015, to require registered investment advisors to adhere to AML rules, and a public comment period was opened for 60 days. FinCEN spokeswoman Candice Basso told ThinkAdvisor last June that FinCEN was “considering public comments as it crafts the final rule” for RIAs.

FinCEN has yet to finalize that rule.

— Check out FINRA’s 5 Biggest Fine Categories in 2016 on ThinkAdvisor.


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