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

A compliance officer at a member broker-dealer is conducting an internal audit of the firm's Customer Identification Program (CIP) and regulatory reporting protocols under the Bank Secrecy Act (BSA). Which of the following statements accurately describe regulatory compliance requirements for Customer Identification Programs (CIP), Currency Transaction Reports (CTRs), and Suspicious Activity Reports (SARs)?

  1. Customer Identification Program (CIP) rules require broker-dealers to verify the identity of each customer using documentary or non-documentary methods within a reasonable time before or after account opening.Answer
  2. Broker-dealers must file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days of initial detection of a suspicious transaction involving $5,000 or more.Answer
  3. C
    Broker-dealers must file a Currency Transaction Report (CTR) for physical currency transactions exceeding $5,000 within 30 calendar days of the transaction date.
  4. D
    Broker-dealers must submit all mandatory Bank Secrecy Act filings, including CTRs and SARs, directly to FINRA's Enforcement Division rather than FinCEN.

Answer

The correct statements are that Customer Identification Program (CIP) rules require identity verification using documentary or non-documentary methods within a reasonable time before or after account opening, and that Suspicious Activity Reports (SARs) must be filed with FinCEN within 30 calendar days of detecting suspicious activity involving $5,000 or more.
Under the Bank Secrecy Act and USA PATRIOT Act, broker-dealers must implement a Customer Identification Program (CIP) that verifies the identity of each customer within a reasonable time before or after account opening using documentary or non-documentary methods. Additionally, firms are required to file a Suspicious Activity Report (SAR) with FinCEN within 30 calendar days of detecting any suspicious transaction involving $5,000 or more in funds or assets.

Step-by-Step Solution

1
Evaluate Customer Identification Program (CIP) requirements for account opening.
Confirm that CIP standards under the USA PATRIOT Act require broker-dealers to verify the identity of account holders using reliable documents or non-documentary methods within a reasonable timeframe.
Establishing customer identity is a foundational requirement of customer due diligence rules.
2
Analyze Suspicious Activity Report (SAR) monetary thresholds and filing deadlines.
Confirm that SARs are triggered by suspicious transactions aggregating to $5,000 or more and must be filed with FinCEN within 30 calendar days of discovery.
This matches Bank Secrecy Act statutory reporting rules.
3
Review Currency Transaction Report (CTR) rules and regulatory agency oversight to eliminate incorrect options.
Identify that CTRs apply strictly to currency/cash transactions exceeding $10,000 in a single business day (filed within 15 calendar days), and that all BSA reports are submitted to FinCEN, not FINRA.
Distinguishes CTR threshold/timeline rules from SAR rules and attributes BSA reporting jurisdiction correctly to FinCEN.

Key Concept

Anti-Money Laundering (AML) Compliance & Reporting Thresholds
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Topics

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