SIA issues guidance for brokers

WASHINGTON, DC – The Securities Industry Association (SIA) Anti-Money Laundering (AML) Committee has issued guidance and training material for suggested practices for customer identification programmes (CIPs) by broker-dealers.

The CIP rule – under Section 326 of the USA Patriot Act – requires broker-dealers to establish, document and maintain a written CIP that must be part of the overall AML programme. The CIP must include risk-based procedures for verifying the identity of each customer who opens a new account.

The AML Committee hopes the guidance will assist firms in developing and implementing their CIPs, although each firm must conduct an assessment of its own risks and implement a CIP that best reflects an account opening process designed to address its own vulnerabilities to money laundering and terrorist financing.

Alan Sorcher, the SIA's associate general counsel and staff adviser to the AML Committee, says Section 312 of the Patriot Act – which requires enhanced due diligence for foreign correspondent and private banking accounts – will require the most effort to comply with in the whole AML programme.

"We believe training is pivotal to compliance with these rules. Although the firms are different, the key to AML turns on the development of individuals responsible for the programmes. We have been providing training to firms to help them implement these rules," Sorcher says.

The SIA and Midi, a provider of compliance and ethics training solutions based in New Jersey, have developed two AML training courses specifically for institutional and retail securities firms. The AML training is targeted at the day-to-day challenges faced by both institutional and retail brokerage professionals. The courses are currently available both online and on DVD for traditional instructor-led classroom environments.

"AML training is an ongoing requirement in the securities industry and organisations are continuously challenged to deliver effective, industry-specific training year after year. The course should help securities firms meet their annual training requirement," says Sorcher.

The guidelines emphasise that the broker-dealers will be responsible for "any relationship established to effect transactions in securities, even though some relationships might not be a traditional brokerage account".

The guidelines also urge broker-dealers to pay particular attention to 'higher-risk accounts' opened by certain types of non-US persons or entities with addresses in high-risk locations that present higher risks of money laundering or terrorist financing. OR&C