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Question

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

A compliance officer at a FINRA member firm is reviewing the firm's obligations under federal Anti-Money Laundering (AML) and Customer Identification Program (CIP) regulations. Which of the following statements regarding AML filing requirements and CIP rules are correct?

  1. Currency Transaction Reports (CTRs) must be filed with FinCEN for cash transactions exceeding $10,000 in a single business day.Answer
  2. Broker-dealers are required to verify the identity of each customer opening a new account within a reasonable period of time.Answer
  3. C
    Suspicious Activity Reports (SARs) are required only when suspicious transactions involve cash exceeding $10,000.
  4. D
    Member firms must send written notification to a customer within 30 calendar days after filing a Suspicious Activity Report (SAR) on their account.

Answer

Currency Transaction Reports (CTRs) must be filed for cash transactions exceeding $10,000 in a single business day, and broker-dealers must verify customer identities under CIP rules.
Under federal AML rules, CTRs must be submitted to FinCEN for single-day cash transactions exceeding $10,000. Additionally, CIP regulations mandate that broker-dealers verify the identity of each individual opening an account. Both of these statements correctly outline broker-dealer AML duties.

Step-by-Step Solution

1
Identify the mandatory filing threshold for Currency Transaction Reports (CTRs).
CTRs are triggered whenever physical cash transactions exceed $10,000 in a single business day.
This is a primary requirement under the Bank Secrecy Act to prevent money laundering.
2
Identify key Customer Identification Program (CIP) rules under the USA PATRIOT Act.
Firms must verify customer identity using government-issued photo ID or non-documentary methods within a reasonable timeframe.
CIP policies ensure that financial institutions verify the true identity of all account holders.
3
Evaluate threshold and notification rules for Suspicious Activity Reports (SARs) to rule out incorrect options.
SAR filings apply at a $5,000 threshold across all transaction types and must remain completely confidential.
Confusing SAR (5,000threshold,strictlyconfidential)withCTR(5,000 threshold, strictly confidential) with CTR ( 10,000 cash threshold) is a common misconception.

Key Concept

Anti-Money Laundering Thresholds and Customer Identification Program Rules
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Topics

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