ANTI-MONEY LAUNDERING COMPLIANCE PROGRAM FCM TRAINING

1. ANTI-MONEY LAUNDERINGCOMPLIANCE PROGRAMFCM TRAINING

2. Stages of Money Laundering • Placement • Layering • Integration

3. Anti-Money Laundering Program Rule 2-9(c) • Policies, Procedures and Internal Controls • Designated Compliance Officer • Ongoing Training • Independent Audit Function

4. Policy Statement • Committed to following all laws and regulations • Committed to not being used as part of money laundering scheme

5. Identification and Verification • Verify the identity of the customer • Learn the nature of customer’s business • Learn intended purpose of customer’s transactions

6. Required Minimum Information • Name and Address (or business location) • U.S Persons: • SSN or TIN • Non-U.S. Persons: • Passport number

7. Verifying Documents • Driver’s license • State I.D. Card • Utility bills • Business incorporation records • Business license • Partnership agreements

8. OFAC’s Lists • Sanctioned Countries: • Need to check if you can do business • Specially Designated Nationals and Blocked Persons • May not do business and must report immediately

9. FCM/IB Allocation • Allocation must be in writing • Identify who is doing what • Must have reasonable basis to believe other entity is fulfilling its function

10. Omnibus/Pool Accounts • If there is no relationship with underlying customer, FCM must conduct risk-based due diligence on the intermediary • FCM generally not required to do due diligence on underlying customer/ participant

11. Regulated Foreign Intermediaries • Is the intermediary located in a FATF member country? • What is your past experience with the intermediary? • What is the intermediary’s business reputation?

12. Verification Requirements • Effective October 26, 2002 • Verify identity to extent reasonable and practicable • Maintain records used to verify identity • Consult lists of known or suspected terrorists or terrorist organizations

13. Definition:Suspicious Transaction • A transaction that has no business or apparent lawful purpose, is unusual for the customer, or lacks any reasonable explanation.

14. Red Flags • Structuring • Evasiveness about identity • Trading with little or no risk • Wire transfers to or from high risk countries

15. Reporting • DSRO • FinCEN

16. Qualified Staff • Must be trained • May want to do background checks • Make sure logical division of duties

17. Recordkeeping • Types of records • Location or records • Period of retention

18. Designated Compliance Officer • Can be a specific person or a department • Can also be responsible for other compliance functions • No need to be a principal or Associate Member • Must be independent of areas overseen

19. Compliance Officer Responsibilities • Ensure firm has adequate customer identification and verification procedures • Ensure firm has adequate guidelines for monitoring and reporting suspicious activities • Receive reports of suspicious activities

20. Compliance Officer Responsibilities • Gather relevant information to analyze and investigate • Determine whether there is any further reporting obligation • Ensure recordkeeping procedures are adequate

21. Training • Formalized program is not required • Goal is to provide appropriate personnel with information to carry out AML program • Must be provided to appropriate personnel at least annually

22. Content Of Training • Highlight red flags • Monitoring for red flags • How to handle suspicious activity • Review of any firm experiences • Recordkeeping policies

23. Training Methods • Firm Manual • Video Presentation • Seminar with hypothetical situations • Periodic written updates

24. Independent Audit Function • Can be done by internal employees or outside party • Internal employees should be independent of the functional areas • Outside party should have experience

25. Independent Audit Function • Must be conducted at least annually • Results must be documented and reported

26. Hypotheticals

27. Suspicious Activity Reports • Not currently required of FCMs, but Treasury is expected to require from FCMs • Implementing regulations will probably require that these reports be filed under certain circumstances

28. Suspicious Activity Reports • Currently, FCMs can file these reports voluntarily • FCM is protected from liability for disclosures reported on SAR

29. Information Sharing with Law Enforcement Agencies • Sharing with law enforcement agencies includes FCMs • Practically, FCMs will probably not be effected by this until they are required to file SARs • Provides immunity for liability under the FRPA

30. Information Sharing Among Financial Institutions • Currently does not include FCMs in the definition • FCMs would not be covered by the safe harbor

31. NFA’s Focus on Members’ Anti-Money Laundering Program • Proper procedures • Adequate internal controls • Adhering to procedures

32. Anti-Money Laundry Procedures and Policy Statement • Written procedures and policy statement • Procedures • Detecting • Handling • Reporting • Policy Statement • Consequences

33. Separation of Duties • New accounts • Customer funds • Review and approve anti-money laundering procedures • Compliance with anti-money laundering procedures

34. Separation of Duties • Annual audit of anti-money laundering program • Receives audit report • Monitor customer accounts • Investigating suspicious activity • Senior management

35. Customer Account Documentation • SSN or taxpayer ID • Passport or other valid ID • Principal place of business • Nature of business • Intended purpose of trading • Documents used to verify

36. High Risk Accounts • How are accounts identified • What lists are used to identify

37. Suspicious Activity • Review • Investigate • Reporting • Firm management • DSRO or FinCen

38. Training Material • Outline • Videos • Written

39. Supervision of IBs • Written agreement • Allocation of responsibilities • Due diligence by FCM

40. Questions?