Money moved through a brokerage account can hide where it came from. These rules make your firm identify customers, watch what they do and report what looks wrong. Opening the account itself is in the lesson before this one.
Money laundering disguises criminal proceeds as clean money, and brokerage accounts attract it because large sums move fast. The Bank Secrecy Act (BSA) of 1970 requires financial institutions, including broker-dealers, to keep records and file reports that let investigators trace funds. The USA PATRIOT Act of 2001 strengthened it. Broker-dealers must run a written anti-money laundering (AML) program, verify customer identity, report suspicious activity and share information with the government.
The Financial Crimes Enforcement Network (FinCEN) is the Treasury bureau that administers the BSA. It writes the anti-money laundering regulations in Chapter X of Title 31 of the Code of Federal Regulations. It also receives firms' reports and issues Section 314(a) requests. When a 314(a) request names a suspect, the firm searches its records expeditiously, generally within 14 days, and reports any match.
Common mistakes
- Swapping the AML triggers. Using $10,000 as the SAR threshold is the classic wrong answer.
- Choosing a conflicted tester. Anyone doing the tested work, the AML compliance person and anyone reporting to either are out.
- Requiring verification before opening. Collection comes first, and verification may follow within a reasonable time.
Bottom line
- CIP collects name, date of birth, street address and taxpayer ID before opening (a pending taxpayer ID may follow, and a non-U.S. person may give a passport or similar number), verifies within a reasonable time and keeps records five years.
- Rule 3310 requires a written AML program approved by senior management, annual independent testing by an unconflicted tester (every two years only without customer business), a designated AML compliance person, training and risk-based due diligence.
- A SAR covers suspicious activity of $5,000 or more, filed within 30 days of detection (60 with no suspect) and never disclosed except to FinCEN, law enforcement or examining regulators; a CTR covers currency over $10,000, filed within 15 days...
- An entity owned 50 percent or more by blocked persons, adding their stakes together, is itself blocked even if it isn't on the SDN list.
Exam shortcut
$5,000 plus suspicion signals a SAR, more than $10,000 in cash signals a CTR, and 10 business days signals OFAC. Thirty days signals a SAR deadline. If the stem says "sanctioned," the answer is freeze and report, never "file a SAR and keep trading."
The full lesson (about 3,185 words, 21 min read) adds 2 worked examples, all 5 common mistakes, a self-check, free in the app.
Learning objectives
- C10
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