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Introducing/Clearing Relationship Targeted

The relationship between introducing and clearing brokers has been targeted as problematic during anti-money laundering examinations by the Securities and Exchange Commission, said Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations.

Lori Richards
Lori Richards
The relationship between introducing and clearing brokers has been targeted as problematic during anti-money laundering examinations by the Securities and Exchange Commission, said Lori Richards, director of the SEC's Office of Compliance Inspections and Examinations. Richards told a Securities Industry Association conference that in these relationships, one firm often blames the other when deficiencies are exposed during exams. Richards told CR that examiners will be looking to see if introducing brokers, who have direct contact with the customer, are using clearing brokers' exception reports that identify red flags with customer accounts. "They have to work together to ensure total AML compliance," she said. "They can not hand over the blame."

Separately, examiners will also be looking to see that AML compliance officers are in regular contact with branch offices, Richards said at the March 29 event in New York, adding they should be the focus of firms' AML programs. "They are often in the best position to detect red flags," she said. "You can anticipate questions during exams." Richards reminded delegates that firms should ensure any outsourced AML compliance procedures are being done correctly, adding that exams will be looking into those relationships. Documentation of training for AML programs will also be reviewed, Richards told CR, including firm employees who process wire transfers and new accounts.

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