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唐朱昌
唐朱昌
教授,博士生导师。复旦大学中国反洗钱研究中心首任主任,复旦大学俄...
严立新
严立新
复旦大学国际金融学院教授,中国反洗钱研究中心执行主任,陆家嘴金...
陈浩然
陈浩然
复旦大学法学院教授、博士生导师;复旦大学国际刑法研究中心主任。...
何 萍
何 萍
华东政法大学刑法学教授,复旦大学中国反洗钱研究中心特聘研究员,荷...
李小杰
李小杰
安永金融服务风险管理、咨询总监,曾任蚂蚁金服反洗钱总监,复旦大学...
周锦贤
周锦贤
周锦贤先生,香港人,广州暨南大学法律学士,复旦大学中国反洗钱研究中...
童文俊
童文俊
高级经济师,复旦大学金融学博士,复旦大学经济学博士后。现供职于中...
汤 俊
汤 俊
武汉中南财经政法大学信息安全学院教授。长期专注于反洗钱/反恐...
李 刚
李 刚
生辰:1977.7.26 籍贯:辽宁抚顺 民族:汉 党派:九三学社 职称:教授 研究...
祝亚雄
祝亚雄
祝亚雄,1974年生,浙江衢州人。浙江师范大学经济与管理学院副教授,博...
顾卿华
顾卿华
复旦大学中国反洗钱研究中心特聘研究员;现任安永管理咨询服务合伙...
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上传时间: 2020-08-08      浏览次数:1298次
FINRA Settlement Highlights Importance of Anti-Money Laundering Due Diligence and Monitoring

 

https://www.natlawreview.com/article/finra-settlement-highlights-importance-anti-money-laundering-due-diligence-and

 

A recent enforcement action offers a glimpse of the Financial Industry Regulatory Authority’s (“FINRA”) expectations for firms conducting anti-money laundering (“AML”) due diligence and transaction monitoring.  On July 27, 2020, FINRA settled with broker-dealer JKR & Company (“JKR”) over allegations that the firm failed to detect, investigate, and report suspicious activity in four customer accounts in violation of FINRA Rules 3310(a) and 2010.  JKR agreed to a $50,000 fine and a censure to resolve the matter.  The settlement is notable in that FINRA applied transaction monitoring and due diligence expectations common in the banking industry to a broker-dealer.  It also serves as a reminder that FINRA expects member firms to not only establish written AML policies and procedures, but also to put their AML programs into practice in order to meet their regulatory obligations.

 

FINRA Rule 3310(a) requires member firms establish and implement written policies and procedures reasonably expected to detect and cause the reporting of transactions as required under the Bank Secrecy Act, 31 U.S.C. §5318(g), and its implementing regulations, 31 C.F.R. 1023.320.  NASD Notice to Members 02-21explains that firms must tailor their compliance programs to monitor for potential money laundering, investigate, and file a suspicious activity report (“SAR”), where necessary.

 

According to the FINRA, JKR established written AML procedures but failed to detect, investigate, and report suspicious activity in four customer accounts.  The accounts at issue were held by customers with high-risk backgrounds and relationships.  For example, an accountholder’s president and control person had been barred by the SEC from participating in penny stock offerings seven months before opening the account, and the corporate entities behind two of the accounts were formed in the Seychelles, a known high-risk jurisdiction, only a week prior to account opening.

 

Suspicious trading and wire activity occurred in some of these accounts.  During the Know Your Customer (“KYC”) process, the customers had indicated that one account would liquidate its holdings in a penny stock in order to diversify its holdings, while the other three accounts would trade traditional securities.  However, the penny stock position was never fully liquidated, and a customer involved in the stock’s initial offering continued to trade it almost exclusively.  Proceeds from the penny stock trades were then wired to third parties, including an account related to another customer.  The unexpected activity served no apparent business purpose and raised price manipulation concerns, but went undetected by JKR.

 

According to FINRA, JKR missed other red flags, including passport irregularities, investment advisory and power of attorney relationships among the customers, one customer’s control of three accounts, unusual transfers and journal entries that served no business purpose, and account inactivity that called into question a customer’s reason for using the firm’s services.

 

In identifying these specific red flags, the JKR action makes clear that FINRA will hold member firms to the same standard of customer due diligence and transaction monitoring associated with banks and conventional credit institutions.  Member firms should conduct comprehensive and ongoing KYC (i.e., background checks, negative news and litigation searches for all related parties and accounts, account profile and activity review) and robust transaction monitoring (i.e., third party transfers, manipulative transactions, etc.).  A member firm that fails to effectively implement and maintain its written AML program will run afoul of FINRA Rules 3310(a) and 2010.  Firms must put their written procedures into practice, including conducting adequate customer due diligence and implementation of effective transaction monitoring plans appropriately tailored to their business model.