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Question

Difficulty: MediumAnti-Money Laundering (AML), KYC, and Sanctions Compliance

Under FINRA rules and federal Anti-Money Laundering (AML) regulations, member broker-dealers must maintain comprehensive AML compliance programs and Customer Identification Programs (CIP). Which of the following statements correctly describe mandatory broker-dealer obligations under these regulations?

  1. Member firms must designate a designated AML compliance officer and notify FINRA of any changes to the officer's contact information within 30 calendar days.Answer
  2. B
    Suspicious Activity Reports (SARs) must be filed with FinCEN only when a suspicious cash transaction exceeds $10,000 in a single business day.
  3. Under the firm's Customer Identification Program (CIP), identity verification procedures must be completed within a reasonable time before or after an account is opened.Answer
  4. D
    Currency Transaction Reports (CTRs) are required within 30 days for any wire transfers routed to high-risk foreign offshore accounts.

Answer

The correct statements are that member broker-dealers must designate an AML compliance officer and update FINRA within 30 calendar days of any changes, and must verify customer identity under CIP within a reasonable time before or after account opening.
Designating an AML compliance officer with FINRA notification within 30 calendar days of changes and verifying customer identities under CIP procedures within a reasonable time before or after account opening accurately state regulatory requirements for broker-dealers under FINRA Rule 3310 and Bank Secrecy Act provisions.

Step-by-Step Solution

1
Evaluate the requirement for designating an AML compliance officer.
FINRA Rule 3310 mandates that broker-dealers appoint a designated AML compliance officer and notify FINRA of updates within 30 calendar days.
Regulatory compliance requires firms to maintain designated personnel for oversight and communication.
2
Evaluate Customer Identification Program (CIP) timing requirements.
Under the USA PATRIOT Act and FinCEN guidelines, CIP requires verifying customer identity within a reasonable timeframe before or after opening an account.
Identity verification prevents fraudulent account creation and ensures compliance with KYC rules.
3
Differentiate SAR and CTR monetary thresholds and filing triggers.
SARs require reporting suspicious transactions of 5,000ormorewithin30days,whereasCTRsrequirereportingphysicalcashtransactionsexceeding5,000 or more within 30 days, whereas CTRs require reporting physical cash transactions exceeding 10,000 within 15 days.
Distinguishing cash transaction reporting (CTR) from suspicious activity reporting (SAR) is critical for regulatory compliance.

Key Concept

Broker-Dealer AML Officer Designation and CIP Verification Standards
Estimated Time:1m 30s
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Topics

Anti-Money Laundering (AML), KYC, and Sanctions Compliance