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

A broker-dealer compliance manager is reviewing firm policies regarding customer identity verification, currency transaction monitoring, and suspicious activity reporting under federal Anti-Money Laundering (AML) and Bank Secrecy Act (BSA) rules. Which of the following statements regarding these compliance obligations are correct? (Select all that apply.)

  1. Under Customer Identification Program (CIP) rules, a member firm must collect essential customer identification prior to account opening and verify identity within a reasonable time, maintaining written procedures for handling accounts when identity cannot be verified.Answer
  2. A Currency Transaction Report (CTR) must be filed with FinCEN within 15 calendar days whenever a single customer deposits or withdraws physical cash exceeding $10,000 in a single business day.Answer
  3. A Suspicious Activity Report (SAR) must be filed within 30 calendar days for transactions conducted or attempted through a broker-dealer involving $5,000 or more if the firm suspects money laundering, and the firm is legally prohibited from notifying the customer involved.Answer
  4. D
    A Suspicious Activity Report (SAR) is only required when physical currency deposits exceed 10,000,andtransactionsunder10,000, and transactions under 10,000 are entirely exempt from federal AML reporting frameworks.

Answer

The correct statements are those establishing that CIP rules require written procedures for handling unverified accounts, CTR filings are mandatory within 15 calendar days for currency deposits exceeding 10,000inabusinessday,andSARfilingsarerequiredwithin30calendardaysforsuspicioustransactionsof10,000 in a business day, and SAR filings are required within 30 calendar days for suspicious transactions of 5,000 or more while maintaining strict confidentiality from the customer.
The correct options accurately state the regulatory parameters governing broker-dealer compliance: CIP procedures require identity verification with written protocols for unverified accounts; CTRs apply to physical currency exceeding 10,000inasinglebusinessday(filedwithin15calendardays);andSARsapplytosuspiciousactivitiesinvolving10,000 in a single business day (filed within 15 calendar days); and SARs apply to suspicious activities involving 5,000 or more (filed within 30 calendar days under strict non-disclosure obligations).

Step-by-Step Solution

1
Evaluate Customer Identification Program (CIP) requirements
Confirm that collecting key identification data before opening an account and maintaining procedures for handling unverified identity accounts is a core CIP requirement under the USA PATRIOT Act.
Broker-dealers must establish reasonable risk-based procedures to verify the identity of each customer opening an account.
2
Evaluate Currency Transaction Report (CTR) parameters
Confirm that CTRs apply to physical cash transactions exceeding $10,000 conducted in a single business day and must be submitted to FinCEN within 15 calendar days.
The Bank Secrecy Act sets a strict $10,000 cash threshold and 15-day timeline for currency reporting.
3
Evaluate Suspicious Activity Report (SAR) thresholds and confidentiality rules
Confirm that SARs are required for suspicious activities involving $5,000 or more, have a 30-calendar-day filing deadline, and strictly prohibit disclosure to the customer.
FinCEN rules mandate SAR filings at the $5,000 threshold and impose a legal gag order to prevent tipping off targets of anti-money laundering investigations.
4
Analyze the incorrect statement regarding SAR cash and monetary limits
Identify that confusing the SAR 5,000thresholdwiththeCTR5,000 threshold with the CTR 10,000 threshold, or assuming transactions under $10,000 are exempt from AML reporting, is incorrect.
SARs apply across all funds and securities transfers starting at 5,000,andcashdepositsspecificallystructuredunder5,000, and cash deposits specifically structured under 10,000 to evade CTRs are primary triggers for SAR filings.

Key Concept

AML Reporting Thresholds, CIP Requirements, and Confidentiality Rules
Estimated Time:2m 0s
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Topics

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