By: Charlene Osmanski

While the proposed amendments for AML programs are substantively the same, Member Firms should still update their programs to account for the language changes and ensure they have the most accurate definitions available within their program. There are three key areas in which Members should update the language in their Programs: Beneficial Owners, SAR Filings, and Correspondent Accounts.

Beneficial Owners

Although the number of beneficial owners for each legal entity customer may vary, each FCM and IB is required to identify at least one beneficial owner under the control prong. This does not preclude a Member from identifying additional individuals as part of its customer due diligence. A beneficial owner is now defined as:

  1. each individual, if any, who directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, owns 25% or more of the equity interests of a legal entity customer; and
  2. a single individual with significant responsibility to control, manage or direct a legal entity customer, including an executive officer or senior manager or any other individual who regularly performs similar functions.

SAR Filings

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.

A SAR filing needs to be made within thirty days following the date of the initial detection by the Firm of facts that may constitute the basis for reporting becomes aware of the suspicious transaction, or, if the identity of the suspicious person is unknown, within an additional thirty days of identification of such person, but in any event no later than sixty days in total.

Correspondent Accounts

Members should first check if they accept correspondent accounts; if they list correspondent accounts as prohibited, then the language does not need to be updated. However, for Members who accept correspondent accounts, they should consider a number of adjusted factors when assessing risk:

  • the nature of the foreign financial institution’s business and the markets it serves;
  • the type, purpose and anticipated activity of the correspondent account;
  • the nature and duration of the FCM’s or IB’s relationship with the foreign financial institution (and any of its affiliates);
  • the anti-money laundering and supervisory regime of the jurisdiction in which the foreign financial institution is chartered or licensed and, to the extent reasonably available, of the jurisdiction in which any company that is an owner of the foreign financial institution is incorporated or chartered; and
  • information known or reasonably available to the FCM or IB about the foreign financial institution’s anti-money laundering record.

While the above listing is not exhaustive of all the changes proposed by NFA, they are the most direct and applicable to current Members. Any Member with specific AML questions should contact Turnkey Trading Partners for assistance in determining whether additional modifications are needed to their program.