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Question

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

Under FINRA Rule 3310, broker-dealers are required to establish and maintain a written Anti-Money Laundering (AML) compliance program to detect and report suspicious activities. How frequently must a member firm conduct independent testing of its AML compliance program?

  1. Annually (on a calendar-year basis) by qualified firm personnel or an independent outside partyAnswer
  2. B
    Quarterly, coinciding with standard Currency Transaction Report (CTR) filing schedules
  3. C
    Every two years, under the direct administration of the Internal Revenue Service (IRS)
  4. D
    Only when specifically mandated by the Securities and Exchange Commission (SEC) following a regulatory audit

Answer

Annually (on a calendar-year basis) by qualified firm personnel or an independent outside party
FINRA Rule 3310 specifies that member firms must provide for annual (calendar-year) independent testing of their Anti-Money Laundering compliance program. The testing must be performed by independent, knowledgeable firm personnel or an outside party.

Step-by-Step Solution

1
Identify the core regulatory rule governing broker-dealer Anti-Money Laundering (AML) compliance programs.
FINRA Rule 3310 sets the requirements for member firms' AML compliance programs under the Bank Secrecy Act.
Broker-dealers must establish procedures to detect, discourage, and report money laundering and terrorist financing activities.
2
Determine the mandatory timeline for independent testing of the AML program.
Testing must be conducted at least annually (every calendar year).
Annual testing ensures the firm's AML safeguards, reporting procedures, and internal controls remain effective and updated.
3
Verify who is permitted to perform the independent testing.
The test must be conducted by knowledgeable firm personnel independent of the AML program or by a qualified external party.
Independence ensures objective evaluation of the firm's compliance operations.

Key Concept

FINRA Rule 3310 Independent AML Testing Frequency
Estimated Time:45s
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Topics

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