DETAIL

Financial Industry Regulatory Authority (FINRA) Rule 3310 requires that members develop and implement a written Anti-Money Laundering (AML) program reasonably designed to comply with the requirements of the BSA, and the implementing regulations promulgated thereunder by the Department of the Treasury.

FINRA observed that firms with effective AML programs actively tailor their risk-based AML program to the firms business model and associated AML risks as opposed to simply implementing a more generic program. They also conducted independent testing that included sampling customer accounts in order to test whether the firm was collecting and verifying customer identification information on all individuals and entities that would be considered customers under the BSA, as well as trading and money movement activity to test whether the firm was performing adequate monitoring for and investigations of potentially suspicious activity. In addition, they designed training programs that were specific to the roles and responsibilities of the participating employees and captured current and evolving aspects of the AML landscape.

REQUIRED:

(a) State and elaborate the FIVE (5) FINRA observed instances where firms failed to establish and implement an AML program reasonably designed to detect, and cause the reporting of, suspicious activity.

(20 marks)

(b) Elaborate on the benefits of having a risk-based AML program.