The Complexities of FINRA Rule 3011, and Why Outside Help is Needed to Comply with it

Starting in 2002, FINRA, the Financial Industry Regulatory Authority, implemented FINRA Rule 3011 to crack down on money laundering. FINRA worked with the Securities and Exchange Commission (SEC) to implement FINRA Rule 3011 so that an anti-money laundering program would comply with Bank Secrecy Act (31 U.S.C. 5311, et seq.). Since that time, securities firms have had to monitoring accounts to prevent money laundering, and then report on their findings to FINRA. This has entailed companies coming up with a means of keeping track of their accounts, and then learning how to test for improper activity and report on their findings.

Performing Regular Tests

FINRA Rule 3011 has some very specific requirements when it comes to annual tests of the procedures to clamp down on money laundering. A firm has to be able to prove that they are complying with the anti-money laundering rule, and this means that a person (or team) is designated to follow all aspects of FINRA Rule 3011. The problem is, section C of FINRA Rule 3011 requires that the tester does all of the following:

• They must be knowledge of the appropriate sections of the Bank Secrecy Act that cover the testing process.
• They can’t be someone who does any of the operations required to be tested.
• They can’t be one of the people responsible for insuring that the firm complies with FINRA Rule 3011.
• They can’t be a person who works for either of the above-referenced individuals.

Finding a Staff Member

In a lot of cases, these requirements of FINRA Rule 3011(c) can several limit the available staff for performing the annual testing. Now, if some conditions are met, a staff member who does report to those people can do the test, if:

• There’s no one else available to do the test who is qualified to do it.

• Reviewing the work of a supervisor can be daunting, and could lead to retaliation. So, the firm must have written policies covering such potential conflicts of interest.

• When the testing is completed, the results need to be presented to a supervisor of one of the above-referenced people.

• If this is what the firm must do to obey FINRA Rule 3011, documentation has to be provided. If the results of the testing don’t appear consistent with FINRA Rule 3011(c), then a written explanation must be done.

Looking at these requirements, it’s easy to see that finding such an individual can be quite difficult.

The Best Way to Comply

When taken in its totality FINRA Rule 3011 is a complex piece of regulation, and one that can be very costly and time-consuming. For all these reasons, making use of an expert sub consultant to insure your firm’s compliance is a good idea. For more information about complying with FINRA Rule 3011, please fill in the contact form on this page and a professional will contact you for your complimentary consultation.