US regulators have been increasing their focus on modernizing and sharpening AML regulations. As a result, many financial institutions have outsourced aspects of their AML programs to third parties or affiliate firms.
However, FINRA recently issued its largest ever penalty for AML violations, fining an introducing broker for unreasonably relying on an affiliated clearing firm to fulfill certain AML responsibilities. Financial institutions that outsource aspects of their AML program should perform ongoing due diligence on the AML service provider, enter into a written contractual agreement with the service provider, and ensure that the service provider dedicates sufficient AML resources.
This Financial crimes observer analyzes lessons learned from FINRA’s enforcement action, and provides our advice on what financial institutions should be doing now.