The SEC Division of Trading and Markets (the "Division") warned that broker-dealers are not conducting adequate due diligence on omnibus accounts. The Division cautioned broker-dealers that omnibus accounts held by foreign financial institutions and used to transact in low-price securities pose a high risk for illicit activities, including money laundering.
In a Staff Bulletin, the Division described the AML obligations of broker-dealers under the Bank Secrecy Act, SEA Rule 17a-8 ("Financial Recordkeeping and Reporting of Currency and Foreign Transactions"), and FINRA Rule 3310 ("AML Compliance Program"). The Division stated that:
The Division stated that a broker-dealer's assessment of the risks associated with a foreign omnibus account should include an assessment of the foreign financial institution's underlying customers. There are situations, the Division wrote, in which a broker-dealer should request information on the underlying ultimate beneficial owners of the securities being traded in an omnibus account. The Division noted circumstances in which (i) it is difficult to obtain information about a foreign financial institution's underlying customers, and (ii) obtaining due diligence certifications from the foreign financial institution is insufficient to mitigate the risks associated with low-priced securities. The Division advised that in these circumstances, the broker-dealer should refuse the omnibus account, reject certain transactions, and/or file a suspicious activity report.
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