The Financial Crimes Enforcement Network (FinCEN) has issued the first government-wide priorities for anti-money laundering and countering the financing of terrorism policy, which was mandated by the Anti-Money Laundering Act of 2020 (AML Act). FinCEN also issued a statement to provide covered non-bank financial institutions (NBFIs), including broker-dealers, with guidance on how to approach the AML/CFT Priorities.
With the recent increase in the number of customers seeking to open brokerage accounts and trade options, FINRA reminds members of the requirements for determining whether to approve a customer to trade options. Regardless of whether the account is self-directed or options are being recommended, members must perform due diligence on the customer and collect information about the customer to support a determination that options trading is appropriate for the customer. In addition, FINRA reminds members that options accounts are subject to specific supervisory reviews, including, among others, reviewing the compatibility of options transactions with investment objectives and with the types of transactions for which the account was approved, and are subject to other FINRA rules that apply when opening customer accounts, including among others, customer identification requirements under anti-money laundering rules. FINRA also reminds members of the margin requirements for options transactions.
FINRA Regulatory Notice 20-32 FINRA Reminds Firms to Be Aware of Fraudulent Options Trading in Connection With Potential Account Takeovers and New Account Fraud
FINRA has recently observed an increase in fraudulent options trading being facilitated by (1) account takeover schemes (sometimes referred to as account intrusions), through which a bad actor gains unauthorized entry to a customer’s brokerage account; and (2) the use of new account fraud by a bad actor who fraudulently establishes a brokerage account through identity theft. This Notice provides member firms and associated persons with information regarding options transactions in connection with these account takeover and new account fraud schemes to help identify, prevent and respond to such activity
Cboe Regulatory Circular 20-007 Anti-Money Laundering Compliance Program and Filing Requirements for Certain Trading Permit Holders
As a reminder, in accordance with Cboe Exchange, Inc. (“Cboe Options”)/Cboe C2 Exchange, Inc. (“C2 Options”) Rule 8.12, Anti-Money Laundering Compliance Program, each Trading Permit Holder (“TPH”) organization and each TPH not associated with a TPH organization shall develop and implement a written anti-money laundering program reasonably designed to achieve and monitor compliance with the requirements of the Bank Secrecy Act, and the implementing regulations promulgated thereunder by the Department of Treasury. Please refer to Rule 8.12 for additional information on AML program requirements.
The United States Department of Homeland Security has issued a bulletin under the National Terrorism Advisory System summarizing the heightened risk of potential cyber and physical attacks by Iran against the United States. This Notice outlines steps firms may consider taking to be prepared and respond to any cyber attacks and other business disruptions that may occur.
Several member firms recently notified FINRA that they have experienced email account takeovers (ATOs) while using cloud-based email platforms, including Microsoft Office 365 (O365). Attackers used compromised email accounts to defraud member firms by requesting fraudulent wire requests or stealing confidential firm information or non-public personally identifiable information (PII). This Notice outlines the attackers’ tactics in executing ATOs, as well as steps taken by member firms to address ATO risks when using cloud-based email systems.
FINRA Regulatory Notice 19-18 FINRA Provides Guidance to Firms Regarding Suspicious Activity Monitoring and Reporting Obligations
FINRA is issuing this Notice to provide guidance to member firms regarding suspicious activity monitoring and reporting obligations under FINRA Rule 3310 (Anti-Money Laundering Compliance Program).
FINRA Regulatory Notice 18-19 FINRA Amends Rule 3310 to Conform to FinCEN’s Final Rule on Customer Due Diligence Requirements for Financial Institutions
FINRA has filed for immediate effectiveness amendments to FINRA Rule 3310 (Anti-Money Laundering Compliance Program) to reflect the Financial Crimes Enforcement Network’s (FinCEN) adoption of a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule). The implementation date is May 11, 2018. This implementation date aligns with the compliance date for FinCEN’s CDD Rule.
Cboe RG18-004 Anti-Money Laundering Compliance Program - Customer Due Diligence Requirements and Filing Requirements for Certain Trading Permit Holders
Please note, the Financial Crimes Enforcement Network (FinCEN) adopted a final rule on Customer Due Diligence Requirements for Financial Institutions (CDD Rule), which became effective July 11, 2016. Trading Permit Holders (“TPHs”) to whom the rule applies must be in compliance with the provisions of the CDD Rule by May 11, 2018.
FINRA Regulatory Notice 17-20 FINRA Requests Comment on the Effectiveness and Efficiency of Its Rules on Outside Business Activities and Private Securities Transactions
FINRA is conducting a retrospective review of the rules governing outside business activities and private securities transactions to assess their effectiveness and efficiency. This Notice outlines the general retrospective rule review process and seeks responses to several questions related to firms’ experiences with these specific rules.
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