Many securities broker-dealers, particularly small independent firms, think money laundering can't happen to them. They think that because they are smaller, they are less likely to come under regulatory scrutiny.
The Financial Industry Regulatory Authority (FINRA), which regulates broker-dealers, has demonstrated that in Anti-Money Laundering compliance, size does NOT matter.
Anti-Money Laundering compliance programs are required of brokers-dealers of all sizes under the Bank Secrecy Act and the USA PATRIOT Act, as prescribed by FINRA Rule 3310. Screening for OFAC sanctions is required by the U.S. Treasury.
In AML compliance, you are expected to have a reasonably-designed, effective AML compliance program tailored to the business of the firm. It must meet the "four pillars" requirements:
Ignoring your regulatory responsibilities will lead to enforcement actions and the potential of large fines. Senior managers, boards of directors and even compliance officers risk suspension, censure and fines. We've all read the FINRA enforcement actions.
The following Best Practices will help your firm, regardless of size, avoid the penalties, reputational harm and business damage that result from failure to comply with AML regulations.