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?