Independent AML Testing of Introducing Broker-Dealers

Author: Gina Storelli, CAMS-Audit

In October of 2001, the United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (“USA PATRIOT” or “PATRIOT”) Act was enacted by Congress in response to the September 11, 2001 terrorist attacks. Among other things, the PATRIOT Act amended and strengthened the Bank Secrecy Act (“BSA”) and imposed new obligations on financial institutions intended to detect and deter money laundering and terrorist financing activities.

Beginning in April of 2002, broker-dealers were required to establish and implement Anti-Money Laundering (“AML”) compliance programs. The basic elements of such programs were to include: (i) a system of internal policies, procedures and controls; (ii) the designation of an AML Compliance Officer responsible for implementing and monitoring the day-to-day operations and internal controls of the program; (iii) ongoing employee training; and, (iv) independent testing of the AML Program. Since then, AML has been a focus of regulators as evidenced by its consistent inclusion as an examination priority by the Financial Industry Regulatory Authority (“FINRA”) and the Securities and Exchange Commission (“SEC”) however firms are still struggling with the implementation of AML compliance.

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