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AML Update: Effective May 18, FCMs and IBs must file Suspicious Activity Reports

On November 22, 2003, the Department of Treasury through the Financial Crimes Enforcement Network (FinCEN) issued a final rule requiring FCMs and IBs to report suspicious financial transactions to FinCEN by filing the Securities and Futures Industries Suspicious Activity Report (SAR-SF). FCM and IB Members should be filing SAR-SFs for transactions occurring after May 18, 2004.

The final rule requires FCMs and IBs to report suspicious transactions that are conducted or attempted by, at, or through an FCM or IB, involve an aggregate of at least $5,000 in funds or other assets (not limited to currency), and the FCM or IB knows, suspects or has reason to suspect that the transaction (or pattern of transactions):

  • Involves funds that come from illegal activity or are part of a transaction designed to conceal that the funds are from illegal activity;

  • Are designed, such as through structuring, to evade the reporting requirements of the Bank Secrecy Act (BSA);

  • Do not appear to serve any business or apparent lawful purpose; or

  • Use the FCM or IB to facilitate a criminal transaction.

FCMs and IBs should keep in mind that the definition of transaction is very broad and is not limited to transactions conducted on a designated contract market or a derivatives transaction execution facility.

Additional portions of the rule address exemptions, dual registrants, filing requirements, confidentiality, safe harbor and other requirements. The full text of the Rule can be found at FinCEN's Web site ( http://www.fincen.gov/fedregister_fcmfinalrule.pdf).

In addition, a copy of form SAR-SF can be found at http://www.fincen.gov/reg_bsaforms.html.

This final rule also brings FCMs and IBs into the regulatory definition of "financial institution" for purposes of the BSA. As a result, FCMs and IBs are now required to comply with the currency transaction reporting (CTR) and funds transfer recordkeeping requirements set forth in the BSA. FCMs and IBs no longer have to file Form 8300 with the IRS for receipt of currency over $10,000 in a trade or business. Information on CTRs and other BSA forms is available at 800-800-2877.

NFA has also posted on its Web site a document developed by the staffs of the CFTC, FinCEN and the Department of the Treasury providing guidance for FCMs and IBs regarding the Customer Identification Program rule, which became effective on October 1, 2003. The document, written as a series of questions and answers, covers CIP issues such as the definition of "customer" and types of customer verification.

"We are aware that anti-money laundering requirements have placed additional regulatory burdens on our FCM and IB Members, says NFA's General Counsel Tom Sexton, "and we are committed to providing the training and resources they need to meet these new requirements."

NFA is the premier independent provider of efficient and innovative regulatory programs that safeguard the integrity of the derivatives markets.
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