The Bank Secrecy Act (BSA) (31 USC § 5318(h)) requires financial institutions to establish Anti-Money Laundering (AML Programs). FCMs are defined as financial institutions in the BSA. IBs have been interpreted by FinCEN to fit within the term "brokers or dealers in commodities" in the financial institution definition and thus also must establish AML Programs.
At a minimum, an AML Program must be in writing and must include:
- Development and maintenance of written policies and procedures, and supervisory controls;
- Reasonably designed to ensure compliance with the BSA and assist a firm in detecting and reporting suspicious activity;
- Designation of a compliance officer;
- Education and ongoing employee training of appropriate personnel; and
- Independent review to monitor and ensure AML program is adequately functioning.
The importance of strong BSA/AML compliance was highlighted in a FinCEN advisory, issued on August 11, 2014, on promoting a culture of compliance issued by financial institutions. The advisory did not change any existing expectations or obligations under BSA/AML requirements, and highlights the importance of strong compliance for senior management, leadership and owners of all financial institutions subject to FinCEN's regulations.
On May 11, 2016, FinCEN issued final regulations that amend the AML Program requirements applicable to financial institutions, including FCMs and IBs. The final regulations codify the AML Program requirements applicable to financial institutions and include explicit customer due diligence requirements (CDD). Additionally, the final regulations require financial institutions to identify and verify the identity of beneficial owners of legal entity customers, subject to certain exclusions and exemptions. Financial institutions, including FCMs and IBs, must be in compliance with these amended requirements by May 11, 2018.
The final regulations clarify CDD requirements outlined in guidance issued jointly on March 5, 2010, by FinCEN, the Federal Reserve, Office of Comptroller of Currency Comptroller of the Currency, Federal Deposit Insurance Corporation, and National Credit Union Administration (the Banking Agencies) and the Securities and Exchange Commission, in consultation with the CFTC. The guidance set forth regulatory expectations for obtaining beneficial ownership information for certain accounts and customer relationships, particularly those that present a high risk for money laundering or terrorist financing.
FinCEN clarified these new CDD requirements and the new obligation to identify and verify the true identity of beneficial owners of legal entity customers in frequently asked questions it issued on July 19, 2016.