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

A newly appointed compliance associate at a FINRA member broker-dealer is conducting a review of the firm's written supervisory procedures regarding Anti-Money Laundering (AML) compliance and Customer Identification Programs (CIP). Which of the following statements accurately describe regulatory mandates under the Bank Secrecy Act and FINRA rules? Select all that apply.

  1. A broker-dealer must file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days after initial discovery of a suspicious transaction involving $5,000 or more.Answer
  2. Under CIP requirements, member firms must verify the identity of each customer opening an account within a reasonable time before or after account opening.Answer
  3. C
    A Currency Transaction Report (CTR) must be filed with FinCEN within 15 calendar days whenever a client executes an electronic wire transfer exceeding $5,000 in a single day.
  4. D
    When a firm files a Suspicious Activity Report (SAR) concerning a customer, IRS guidelines require the broker-dealer to notify the customer in writing within 10 business days.

Answer

The statements regarding the filing deadline of 30 calendar days for Suspicious Activity Reports (SARs) involving $5,000 or more, and the requirement to verify customer identities under CIP within a reasonable time frame, are both correct.
The correct responses identify valid AML and CIP compliance mandates. Suspicious Activity Reports (SARs) must be filed with FinCEN within 30 calendar days for suspicious transactions aggregating $5,000 or more. Furthermore, under the USA PATRIOT Act, broker-dealers must maintain a CIP that verifies customer identity within a reasonable timeframe around account opening.

Step-by-Step Solution

1
Analyze SAR filing requirements under FinCEN rules.
Confirm that suspicious transactions involving $5,000 or more require filing a SAR within 30 calendar days of discovery.
Federal AML rules establish a $5,000 threshold and a 30-day reporting window for broker-dealers.
2
Evaluate Customer Identification Program (CIP) obligations.
Confirm that CIP rules mandate identity verification within a reasonable timeframe around account opening.
USA PATRIOT Act Section 326 mandates reasonable identity verification procedures for new accounts.
3
Evaluate CTR triggers and notification restrictions.
Identify that CTRs apply to physical cash over 10,000(notwiretransfersover10,000 (not wire transfers over 5,000) and that SAR filings must remain confidential from the client.
Confusing CTR thresholds with SAR thresholds or assuming SAR notification is permitted violates regulatory standards.

Key Concept

Anti-Money Laundering (AML) Compliance, SAR/CTR Reporting Rules, and Customer Identification Program (CIP)
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Topics

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