FINRA provided guidance to member firms on reporting and monitoring suspicious activity pursuant to FINRA Rule 3310 ("Anti-Money Laundering Compliance Program").
In a Risk Alert, FINRA states that a broker-dealer must report any transaction of at least $5,000 that:
- may involve funds from or in furtherance of an illegal activity;
- appears designed to evade regulations under the Bank Secrecy Act;
- has no apparent lawful purpose and lacks a "reasonable explanation"; or
- involves use of the broker-dealer to facilitate criminal activity.
FINRA also provided a list of potential red flags for money laundering. The list is organized into categories of potential red flags in:
- customer due diligence and interactions with customers;
- deposits of securities;
- securities trading;
- money movements;
- insurance products; and
- other areas.
Commentary / Christian Larson
FINRA (then known as NASD) last published a list of money laundering red flags for its members in 2002. That two-page list has now been expanded to nine. The detailed red flags in this Risk Alert range from the classic ("customer makes high-value transactions not commensurate with the customer's known income or financial resources") to the modern ("customer engages in transactions suspected to be associated with cyber breaches of customer accounts, including potentially unauthorized disbursements of funds or trades"). The red flags also address indicators of insider trading, coordinated transactions by seemingly unrelated customers, and anonymity in master/sub structures. Broker-Dealers should closely evaluate whether their existing AML programs address these red flags – FINRA certainly will.
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