By: Charlene Osmanski

NFA recently submitted proposed amendments relating to FCM and IB Members anti-money laundering obligations to the CFTC for approval. Thankfully, Member firms can largely relax; the majority of the proposed updates relate to new verbiage. Member firms should still review their AML Programs to account for these language updates, even if the obligations are substantively the same.

In one instance, obligations extending to countries on the high risk and noncooperative list now covers countries identified as high risk or having AML/CFT deficiencies; a distinction that may broaden the scope of countries considered. NFA has also broadened their view of beneficial owners by replacing the ownership and control prongs with expanded definitions of who qualifies in those two requirements.  Two notable changes should be made to Member AML Programs: SARs and correspondent accounts.

NFA has expanded the scope to which SAR reports should be filed. Each of the below requirements has been expanded for reporting when an FCM or IB knows, suspects, or has reason to suspect transactions involving an aggregate of at least $5,000:

  • Involves funds that come from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation;
  • Is designed, whether through structuring or any other means, to evade any requirements of 31 CFR Chapter X or any other regulations under the BSA;
  • Has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the FCM or IB knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction; or
  • Involves the use of the FCM or IB to facilitate a criminal activity.

When assessing the risk associated with a correspondent account, Members should be aware that two of the five factors for consideration have been extended:

First, when considering the nature and duration of a relationship with a foreign financial institution, Members should now also consider the same with any affiliates of the foreign entity.

Second, rather than considering the AML and supervisory regime in which the foreign financial institution is chartered and licensed, FCMs and IBs should look to the jurisdiction of the foreign entity and, to the extent reasonably available, the jurisdiction in which any company that is an owner of the foreign financial institution is incorporated or chartered.

Please review NFA’s proposed changes and ensure that firm AML policies and procedures have been updated accordingly. If you have any questions about these adjustments, please feel free to contact Turnkey today for further assistance by clicking this link.