The Financial Industry Regulatory Authority (FINRA) does more than just oversee broker-dealers in the United States. FINRA can also issue fines and suspensions, as well as bar individuals from the brokerage industry. One way that FINRA determines whether there is an issue that warrants such action is through an investigation by the agency’s Special Investigations Unit.
This unit has undergone some evolution in recent years. In the past, the unit was known as the Anti Money Laundering (AML) Investigative Unit. Indeed, one of the Special Investigation Unit’s jobs is to ensure that firms comply with FINRA Rule 3310, which outlines standards for compliance, including a written AML compliance program.
How does my firm mitigate the risk of FINRA scrutiny?
It helps to have an effective compliance program. Part of an effective compliance program is knowing what the government is looking for. The Financial Crimes Enforcement Network (FinCEN) recently published a set of government-wide priorities. This list specifically outlined the following: corruption, cybercrime, foreign and domestic terrorist financing, fraud, transnational criminal organizations, drug trafficking, human trafficking, and proliferation finance. Broker-dealer firms can better ensure compliance by incorporating these priorities into their AML compliance programs as warranted.
How does my firm add these priorities to our compliance program?
There are two steps that your firm can take to better ensure that these priorities are properly incorporated into your compliance program:
- Research. FINRA has information about each priority threat. Review these threats, investigate the footnotes for more information on each, and get information about these risks.
- Risk assessment. Consider how these priorities are a risk within your business operations. It may be important to incorporate some priorities, while others may not apply.
Broker-dealer firms generally run more smoothly if their compliance programs meet their specific needs — and when everyone understands their specific role. If you have any questions or concerns about your compliance program or related issues, we encourage you to contact the securities law attorneys at Ford O’Brien Landy LLP. With offices in New York City and Austin, Texas, we advise and represent clients nationwide.
Source: FINRA, “AML Update: The Latest Trends and Effective Practices,” May 31, 2022