AML Best Practices for Investment Advisers and Broker/ Dealers. July 7, :00 p.m. to 3:00 p.m. (ET) 2016 National Regulatory Services

Transcription

1 AML Best Practices for Investment Advisers and Broker/ Dealers July 7, :00 p.m. to 3:00 p.m. (ET) 2016 National Regulatory Services

2 Instructor Jennifer Sullivan Jennifer Sullivan Consultant NRS Lakeville, CT Jennifer Sullivan joined NRS in 1997 as a member of NRS IT Department, where she was involved in product development, working with IA and BD clients to create customized compliance solutions and deliver reliable ongoing support. Prior to being promoted to the consulting department in 2007, Jennifer had functioned as NRS Product Support Manager for three years. Jennifer has taken approximately 70 firms through the everchanging FINRA registration process. After completing many of the NMA applications, the newly registered firms request to keep Jennifer on as their consultant for their ongoing outsourcing services with NRS. Jennifer has also conducted countless AML audits, 3120 WSP testing and Risk Assessments. Jennifer recently became a Certified Anti-Money Laundering Specialist (CAMS) and obtained her IACCP (Investment Adviser Certified Compliance Professional) designation National Regulatory Services 2

3 Instructor John Van Der Wal John Van Der Wal Consultant NRS San Francisco, CA John Van Der Wal is a Consultant at NRS and brings over 20 years of compliance and industry-related experience to his position at NRS. For the last 12 years, John has been the president and founder of Compliance Advisory Services, LLC, providing compliance consulting services to SEC and State registered investment advisors and broker-dealers. He has worked in a variety of securities and investment related environments, including financial services, asset management and consulting. John also spent 3 years with FINRA (formerly NASD Regulation, Inc.), conducting reviews and oversight of member firms from its San Francisco District Office. John earned his undergraduate degree from the University of California at Davis and received an MBA from the University of San Francisco s McLaren School of Business National Regulatory Services 3

4 Agenda FINRA Rule 3310 CIP/KYC Program Training Testing/Auditing Current and future requirements for Investment Advisers 2016 National Regulatory Services 4

5 Money Laundering Stages 2016 National Regulatory Services 5

6 FINRA Rule AML Program AML Procedures CIP/KYC Program Training Testing/Auditing 2016 National Regulatory Services 6

7 AML Procedures AML Compliance Officer designation Red Flags SARs CTRs/CMIRs/FBARs Senior management approval Recordkeeping 2016 National Regulatory Services 7

8 CIP/KYC Program Documentary vs non-documentary methods New account approval Customer notification OFAC checks Freezing/closing of accounts 2016 National Regulatory Services 8

9 Training In-house vs. third party training SAR confidentiality should be emphasized in training How frequently should training occur? Who should be included in training? How much time/how many courses should be included? Be sure to document training content and attendance! 2016 National Regulatory Services 9

10 Testing/Auditing your AML Program In-house vs. third party What should be tested? How often should program be tested? 2016 National Regulatory Services 10

11 Registered Investment Adviser Current Requirements Investment advisers currently must comply with the Office of Foreign Asset Control s ( OFAC ) regulations May voluntarily submit Suspicious Activity Reports to the Financial Crimes Enforcement Network ( FinCEN ) Third-party obligations Custodian Executing broker-dealers Affiliates 2016 National Regulatory Services 11

12 What is OFAC? OFAC is an office of the U.S. Department of the Treasury that administers and enforces economic and trade sanctions that further U.S. foreign policy and national security goals against: Terrorists International drug traffickers Targeted foreign countries Persons facilitating the proliferation of weapons of mass destruction 2016 National Regulatory Services 12

13 OFAC Obligations OFAC regulatory requirements include: Blocking accounts and other property of specified countries, entities and individuals Prohibiting or rejecting unlicensed trade and financial transactions with certain countries, entities and individuals OFAC reporting requirements Violations of OFAC regulations can result in: Criminal penalties Civil penalties SEC may inspect any AML programs and could issue a deficiency letter 2016 National Regulatory Services 13

14 Registered Investment Advisers Future Requirements May 5, 2003: Treasury issued a proposal to require certain investment advisers to establish anti-money laundering (AML) programs. October 30, 2008: FinCEN withdrew proposed AML program rules for investment advisers, CTAs, and unregistered investment companies November 15, 2011: Director of FinCEN reported that his agency was currently revisiting the topic of investment advisers and working on a regulatory proposal that would require investment advisers establish AML programs and report suspicious activity. February 27, 2013: Director of FinCEN confirmed in a speech that FinCEN is continuing to work on such a proposal with the SEC. August 25, 2015: Anti-Money Laundering Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers National Regulatory Services 14

15 Proposed Rule Requirements Include SEC RIAs within definition of financial institution Establish anti-money laundering (AML) compliance programs Require Suspicious Activity Reports (SARs) to FinCEN pursuant to the Bank Secrecy Act (BSA) Comply with certain reporting and recordkeeping requirements under the BSA Delegate to the SEC the authority to examine such advisers for compliance with these requirements 2016 National Regulatory Services 15

16 Registered Investment Advisers Future Requirements Written AML program AML officer designation Independent Testing of the firm s AML Program AML Training 2016 National Regulatory Services 16

17 Financial Institution and BSA FinCEN is proposing to include investment advisers in the general definition of financial institution in rules implementing the BSA Such investment advisers will be subject to the BSA requirements generally applicable to financial institutions Includes, but not limited to, the requirements to file Currency Transaction Reports ( CTRs ) and keep records relating to the transmittal of funds 2016 National Regulatory Services 17

18 CIP for RIA s Under Section 326 of the PATRIOT Act The Rule Proposal specifically noted that FinCEN was not proposing a customer identification program ( CIP ) requirement at this time However, FinCEN does anticipate addressing CIP via a joint rulemaking effort with the SEC 2016 National Regulatory Services 18

19 How NRS Can Help AML Audit Services for BDs and IAs AML Education and Training Policies and Procedures ComplianceGuardian Technology Solution Policies and Procedures Management Updated quarterly with new required content AML content will be included Accuity Compliance Link an enterprise-wide compliance solution to reduce AML risk and false positives Go to for more information or call us at Follow us: National Regulatory Services 19

20 Questions? 2016 National Regulatory Services 20