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Atkins Discusses FinCEN CDD Rule on FINRA AML Panel

Don’t miss the the AML Challenges panel at the 2018 FINRA Annual Conference on May 23, 2018 in Washington DC. FirstMark’s founder, Mitch Atkins, will present as a panelist. One of the key topics to be discussed is the FinCEN CDD Rule. The rule became fully effective May 11, 2018. If you’re ready, or even if you’re not, implementation questions still abound. As recently as April 2018. FinCEN issued additional guidance in the form of FAQs. This was the second round of FAQs issued on the FinCEN CDD Rule. The first round can be found here. Many firms have experienced challenges in understanding the nuances involved with the beneficial ownership requirements, including the ownership and control prong. There are numerous exceptions and interpretations to both. Also, perhaps more challenging has been the so-called “fifth pillar” requirements that involving ongoing monitoring to detect potential suspicious activity. The FinCEN CDD Rule codifies, for the first time, the requirement to conduct ongoing monitoring and to update customer information if there are red flags noted. Some AMLCOs have struggled with the concept of the fifth pillar, particularly with regard to the ongoing monitoring requirements. Questions have arisen as to whether the FinCEN CDD Rule requires that small firms implement an automated surveillance system. Guidance issued by Treasury on the FinCEN CDD Rule provides that this is not true – there is no new requirement to install a trade surveillance system. Instead, the FAQs explain that the monitoring can be done on a risk basis. However, during the course of the normal risk monitoring, if a red flag of potentially suspicious activity is noted, the customer profile that was developed based on the FinCEN CDD Rule “nature and purpose” provision should be revisited and if necessary updated. All of these issues will be addressed on the AML Challenges panel at the 2018 FINRA Annual Conference in Washington DC. If you haven’t signed up and were considering doing so, you can at this link. Also, you can view the conference video

Click on the image below to view the conference brochure:

FinCEN CDD Rule Atkins

 

Click on the image below to view FirstMark’s presentation materials (a practical quick reference guide to the FinCEN CDD Rule).

FinCEN CDD Rule Atkins

FirstMark Regulatory Solutions, Inc. is a compliance consulting organization based in Boca Raton, Florida. Mitch Atkins is FirstMark’s founder and principal. He focuses on broker-dealer compliance matters, including anti-money laundering independent testing, FINRA new member applications, FINRA CMAs, FINRA Enforcement litigation support, and supervisory controls testing.

 

 

 

FINRA Tolerance for AML Compliance Failures Fading

AML compliance failures are starting to get the “zero tolerance” message from FINRA. It recently announced its largest fine ever against two firms for AML compliance failures, including the suspension of the AML compliance officer. Mitch Atkins, a former FINRA official breaks down this action in a LinkedIn article. In reality, these sanctions are not too different in scope than that which was levied on Brown Brothers Harriman in 2014. The difference is there are two firms involved in this sanction. Also, the failures in the Brown Brothers case appear to be more limited to the area of low-priced securities and while that is an element of the recent action, it seems broader in scope as to the nature of the compliance failures.

At the recent FINRA Annual Conference in Washington, D.C., FINRA’s head of Enforcement, Brad Bennett, indicated in his comments during a panel discussion that there were more enforcement cases to come in the AML compliance space. Bennett stated that FINRA noted a signficant number of red flags in the recent case, but he suggested that future cases may involve actual money laundering rather than just compliance failures. I suspect these cases will be as significant or more significant given the apparent escalation of sanctions of late.

AML Compliance Failures Don’t Necessarily Mean AMLCOs will be Named

The good news is that Bennett reassured the attendees that the action against the AMLCO in this case was an exception and that FINRA is not out to get compliance officers. He insisted that FINRA carefully considers naming compliance officers and would rather not do it at all. FINRA has long stated that compliance officers who are doing their jobs and who take reasonable steps to address compliance issues will not be named in disciplinary actions. Bennett warned, however, that should senior executives ignore the calls of compliance officers for additional resources and compliance failures were the result of such decisions, FINRA would not hesitate to name them in an action.

Mitch Atkins is a consultant to broker-dealers, investment advisers and financial firms. He has over 23 years experience in the securities industry and is the founder and principal of FirstMark Regulatory Solutions based in Boca Raton, Florida.