Last month Turnkey Trading Partners’ Susan Osmanski spoke on a panel at the National Introducing Brokers Association (“NIBA”) annual conference in Chicago.  A recap of the discussion was recently published at the NIBA website and has been excerpted here for your consideration:

“During the AML panel discussion, I [Osmanski] was asked what the most important component of an AML program was for an Introducing Broker.  In my opinion, the “know your customer” processes of the AML program are the most significant aspect for an IB.  The broker is the one with the relationship with the customer, so is better positioned to know whether transactions are unusual or suspicious.  Cash activity that may be unusual for one customer may be common practice for another.   Communication with customers provides context for unusual transactions. Customer interaction, or the absence of it, may provide the broker insight as to whether atypical activity has a valid purpose or is suspicious.

Strong “know your customer” rules and practices have benefits to an IB beyond AML compliance. I think that it is more likely for an IB to have a customer committing fraud via an unregistered commodity pool than an IB to have a customer that is a terrorist or drug dealer.  Customer identification procedures for entity clients, and Bylaw 1101 adherence procedures can help detect such fraud.   Training staff to be perceptive is wise, and ongoing diligence is necessary.  There are occasions when a customer may make a statement that contradicts information previously provided.  Likewise, a customer may make a large deposit into his account that doesn’t correlate with the financial information provided at account opening.  Sound “know your customer” practices may detect fraud and benefit the Introducing Broker by avoiding being named in a fraud related action.”

If you have any questions regarding your AML obligations or other policy and procedure requirements, please feel free to contact Osmanski directly via my email address susan@turnkeytradingpartners.com.  Turnkey Trading Partners (“TTP”) offers a wide range of consulting solutions to CFTC registered, NFA member firms of all types. We provide a focus on operational support for IBs and would welcome the opportunity to learn more about your business.