It is the policy of the firm to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.
Our AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business.
We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request.
National Security Letters
We understand that the receipt of a National Security Letter (NSL) is highly confidential. We understand that none of our manager, employees or agents may directly or indirectly disclose to any person that the FBI or other federal government authority has sought or obtained access to any of our records. To maintain the confidentiality of any NSL we receive, we will process and maintain the NSL by [PIA Proxy]. If we file a SAR after receiving an NSL, the SAR will not contain any reference to the receipt or existence of the NSL. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.
We will monitor account activity for unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to our business.
Red flags that signal possible money laundering or terrorist financing include, but are not limited to:
Potential Red Flags in Customer Due Diligence and Interactions with Customers
The customer provides the firm with unusual or suspicious identification documents that cannot be readily verified or are inconsistent with other statements or documents that the customer has provided. Or, the customer provides information that is inconsistent with other available information about the customer. This indicator may apply to account openings and to interaction subsequent to account opening.
The customer is reluctant or refuses to provide the firm with complete customer due diligence information as required by the firm’s procedures, which may include information regarding the nature and purpose of the customer’s business, prior financial relationships, anticipated account activity, business location and, if applicable, the entity’s officers and directors.
The customer refuses to identify a legitimate source of funds or information is false, misleading or substantially incorrect.
The customer is domiciled in, doing business in or regularly transacting with counterparties in a jurisdiction that is known as a bank secrecy haven, tax shelter, high-risk geographic location (e.g., known as a narcotics producing jurisdiction, known to have ineffective AML/Combating the Financing of Terrorism systems) or conflict zone, including those with an established threat of terrorism.
The customer has difficulty describing the nature of his or her business or lacks general knowledge of his or her industry.
The customer has no discernable reason for using the firm’s service or the firm’s location (e.g., the customer lacks roots to the local community or has gone out of his or her way to use the firm).
The customer has been rejected or has had its relationship terminated as a customer by other financial services firms.
The customer’s legal or mailing address is associated with multiple other accounts or businesses that do not appear related.
The customer appears to be acting as an agent for an undisclosed principal, but is reluctant to provide information.
The customer is a trust, shell company or private investment company that is reluctant to provide information on controlling parties and underlying beneficiaries.
The customer is publicly known or known to the firm to have criminal, civil or regulatory proceedings against him or her for crime, corruption or misuse of public funds, or is known to associate with such persons. Sources for this information could include news items, the Internet or commercial database searches.
The customer’s background is questionable or differs from expectations based on business activities.
The customer maintains multiple accounts, or maintains accounts in the names of family members or corporate entities, with no apparent business or other purpose.
An account is opened by a non-profit organization that provides services in geographic locations known to be at higher risk for being an active terrorist threat.
An account is opened in the name of a legal entity that is involved in the activities of an association, organization or foundation whose aims are related to the claims or demands of a known terrorist entity.
An account is opened for a purported stock loan company, which may hold the restricted securities of corporate insiders who have pledged the securities as collateral for, and then defaulted on, purported loans, after which the securities are sold on an unregistered basis.
An account is opened in the name of a foreign financial institution, such as an offshore bank or broker-dealer, that sells shares of stock on an unregistered basis on behalf of customers.
An account is opened for a foreign financial institution that is affiliated with a U.S. broker-dealer, bypassing its U.S. affiliate, for no apparent business purpose. An apparent business purpose could include access to products or services the U.S. affiliate does not provide.
Other Potential Red Flags
The customer is reluctant to provide information needed to file reports to proceed with the transaction.
The customer exhibits unusual concern with the firm’s compliance with government reporting requirements and the firm’s AML policies.
The customer tries to persuade an employee not to file required reports or not to maintain the required records.
Notifications received from the broker-dealer’s clearing firm that the clearing firm had identified potentially suspicious activity in customer accounts. Such notifications can take the form of alerts or other concern regarding negative news, money movements or activity involving certain securities.
Law enforcement has issued subpoenas or freeze letters regarding a customer or account at the securities firm.
The customer makes high-value transactions not commensurate with the customer’s known income or financial resources.
The customer wishes to engage in transactions that lack business sense or an apparent investment strategy, or are inconsistent with the customer’s stated business strategy.
The stated business, occupation or financial resources of the customer are not commensurate with the type or level of activity of the customer.
The customer engages in transactions that show the customer is acting on behalf of third parties with no apparent business or lawful purpose.
The customer engages in transactions that show a sudden change inconsistent with normal activities of the customer.
Securities transactions are unwound before maturity, absent volatile market conditions or other logical or apparent reason.
The customer does not exhibit a concern with the cost of the transaction or fees (e.g., surrender fees, or higher than necessary commissions).
A borrower defaults on a cash-secured loan or any loan that is secured by assets that are readily convertible into currency.
There is an unusual use of trust funds in business transactions or other financial activity.
Responsibility for Required AML Records and SAR Filing
Our AML Compliance Person and his or her designee will be responsible for ensuring that AML records are maintained properly and that SARs are filed as required.
We will work closely with our clearing firm to detect money laundering. We will exchange information, records, data and exception reports as necessary to comply with AML laws. As a general matter, we will obtain and use the following exception reports offered by our clearing firm in order to monitor customer activity and we will provide our clearing firm with proper customer identification and due diligence information as required to successfully monitor customer transactions. We have discussed how each firm will apportion customer and transaction functions and how we will share information and set forth our understanding in a written document.
Senior management has approved this AML compliance program in writing as reasonably designed to achieve and monitor our firm’s ongoing compliance with the requirements of the BSA and the implementing regulations under it.