Anti-Money Laundering
NASD Rule 3011, now known as FINRA Rule 3310 requires all broker dealer firms to have Anti-Money Laundering Procedures in place to ward against money laundering as well as an annual AML Audit of the broker dealer firm to review for suspicious activity and money laundering red flags. After September 11, 2001 the Patriot Act expanded the call for anti-money laundering (AML) procedures with the hope of preventing fraudulent activities both nationally and internationally. The amendment of the Bank Secrecy Act (BSA) has forced introducing brokers, commodity trading advisors, futures commission merchants and commodity pool operators to report any suspicious activity, identity verification of their clients and establishing AML programs. As a best practice for hedge funds, an anti-money laundering program is appreciated by investors and regulators.
All financial institutions are required to put their AML procedures in writing and it should include, but not limited to:
• The designated compliance officer
• Procedures that is specific to the institution
• Policies and control that is internal
• Continuous training program for employees
• Program testing through audit function done independently
The Patriot Act implies that the United States will have all jurisdictions over any kind of US Nexus fund. What that means is that all hedge funds will be closely monitored. Even European funds will be regulated if they fall under the US Nexus category. AML procedures that are strongly implemented will take this factor into consideration.
This is particularly important because an investor must make their records visible and available for inspection to assess whether they are involved in laundering money or participate in terrorist financing.
The investment fund manager is entirely responsible and accountable for any violations of the AML program even if a third party Administrator is used to delegate the procedures.
Risks that result in not following procedures
There are risks associated with not adapting proper AML procedures that includes:
Compliance risk – without a proper procedure in place to conform to the regulations set out by the anti-money laundering laws, there are adverse consequences of prosecution, liabilities and penalties.
Risk of company’s reputation – a company is subject to public humiliation if associated or involved with any form of money laundering schemes; whether inadvertently or intentionally.
Financial risk- any company failing to comply with AML procedures is subject to heavy fines.
The risk of going to jail is to be greatly considered when creating proper AML procedures.
Combating anti-money laundering problems
The laundering of money overseas has become such a problem in the international community that it compromises economic development and contributes to an ineffective financial system. To combat this problem, many countries that are a part of the international financial system are enacting their own anti-money laundering laws.
A company that has strong AML procedures will be able to fight against any possibility of money laundering. However, there has to be adequate policies and procedures implemented, ongoing AML audit, effective staff training programs, adaptation of changing regulations, and a strong compliance system. The most crucial factor, however, in reaching AML efficiency, is having a controlled compliance system.
How we can help?
Amlprocedures.com is geared to assist you with all of your AML procedures and requirements. We review companies that conduct AML procedures and help to choose the best one that fit your particular company’s needs. They will assess your company’s current policies and procedures and provide expert help in attaining your compliance control objective. If you are prepared to learn more about AML procedures and to be provided with the right solutions for your company, just enter your information on the right to get a free consultation.
