The Securities and Exchange Commission (SEC) has made it clear: anti-money laundering (AML) compliance remains a top priority for 2024. This isn’t just lip service; the SEC plans to actively examine broker-dealer firms and registered investment advisory (RIA) firms to ensure their AML compliance programs are up to snuff.
But why the continued focus on AML? The answer lies in the risks: money laundering, terrorist financing, and other illicit activities can undermine market integrity and expose investors to harm. By prioritizing AML compliance, the SEC aims to safeguard the financial system and protect investors.
So, what does this mean for you and your firm? Let’s find out!
Key Takeaways for Your Firm’s AML Compliance Program
Here are some key takeaways and actionable steps your compliance team can take to safeguard your firm:
1. Tailor your AML compliance program.
After all, one size doesn’t fit all! The SEC expects your AML compliance program to be a bespoke suit, not an off-the-rack solution. It should be tailored to your firm’s unique risks, considering factors like:
- Location: Are you operating in high-risk jurisdictions?
- Size: Do you deal with large transactions or high-net-worth individuals?
- Activities: What products and services do you offer? Are they susceptible to misuse?
- Customer Base: Who are your clients? Are there any red flags associated with their profiles?
By conducting a thorough risk assessment, you can identify your vulnerabilities and build an AML compliance program that effectively mitigates them.
2. Independent testing is not an option – it’s a must.
Regularly testing your AML compliance program is crucial to identify weaknesses and ensure its effectiveness. The SEC will be looking for evidence of independent testing, so don’t leave it to chance.
Invest in qualified resources to conduct thorough testing of your program’s design, implementation, and operating effectiveness. This will help you identify areas for improvement and demonstrate your commitment to AML compliance.
3. Customer due diligence – know your beneficial owners.
The SEC emphasizes robust customer due diligence (CDD) practices, including identifying and verifying the beneficial owners of legal entity customers. Don’t let complex ownership structures be an excuse for inadequate CDD.
Utilize technology and data analytics to pierce through the layers and uncover the true identities behind your clients. Remember, knowing your beneficial owners is not just an AML compliance requirement; it’s essential for mitigating other risks like fraud and market manipulation.
4. Don’t ignore suspicious activity reports (SARs).
Filing SARs is a critical part of the fight against financial crime. If you suspect suspicious activity, don’t hesitate to file a SAR. The SEC will be reviewing firms’ SAR filing obligations, so ensure you have clear procedures and training in place.
Remember, filing a SAR does not mean you’re accusing someone of wrongdoing; it’s simply reporting suspicious activity for further investigation.
5. Stay vigilant on Office of Foreign Assets Control (OFAC) sanctions.
Broker-dealers and RIAs must also monitor and comply with OFAC sanctions. Ensure your firm has robust screening procedures in place to identify and block transactions involving sanctioned individuals or entities.
Remember, AML compliance is an ongoing process, not a one-time event. By staying vigilant, tailoring your program, and actively managing your risks, you can demonstrate your commitment to safeguarding the financial system and protecting your clients.
AML Compliance with COMPLY
COMPLY’s team of experienced compliance consultants can be your trusted partner in building and maintaining a robust AML compliance program. We offer a comprehensive suite of consulting services designed to help you:
- Conduct thorough risk assessments and tailor your program to your specific needs.
- Design and implement effective customer due diligence procedures, including beneficial ownership identification.
- Develop and test your AML compliance program to ensure its effectiveness.
- Stay up-to-date on the latest regulations and best practices.
When you partner with us, you can comply with confidence.
Don’t wait for the SEC to come knocking. Partner with COMPLY to build an AML compliance program that is not just compliant but effective and sustainable.
Are you ready to enhance your AML compliance program? Let’s talk!