• Stockbroking

    Some services provided by stockbrokers are attractive to criminals wanting to launder the proceeds of crime and to finance terrorism.

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What are the ML/TF Risks?

Stockbrokers carry out transactions in securities with regulated market counterparties, as agent for customers or proprietary trading on their own accounts.

Some stockbrokers deal with high volumes of low value customer transactions, whereas others direct their services towards higher net worth customers, and thus have fewer customers.

Whilst stockbroking might be regarded as being of lower risk compared to many financial products and services, the risk is not as low as in providing investment management services to the same types of customer from similar jurisdictions.

The Money Laundering and Terrorism Financing (ML/TF) risks associated with stockbrokers include:

  • Stockbroking customers may adopt a variety of trading patterns making the identification of unusual behaviour difficult;
  • Customer can quickly buy and sell in the markets which may create breaks in the audit trail;
  • The company is offering no advice and may have little or no knowledge of a customer’s motives;
  • Customers may spread their activities across a variety of brokers for perfectly valid reasons, and often do. Each broker may therefore actually have little in terms of transaction history from which to identify unusual behaviour; and
  • Many firms provide stockbroking services on a non face-to-face basis, including via the internet.

Stockbrokers must ensure the organisation conducts a comprehensive ML/TF risk assessment to identify, assess, mitigate and manage ML/TF risk exposures as a critical first step in complying with AML/CFT laws.

What are the AML/CFT obligations?

In developing responses to obligations under AML/CFT laws and regulations the following steps must be undertaken:

  • Conduct a Money Laundering and Terrorism Financing Risk Assessment;
  • Develop an AML Program that is proportionate to ML/TF Risks;
  • Establish effective Board and Senior Management oversight of the AML/CFT Program;
  • Appoint an AML Compliance Officer;
  • Establish a Customer Due Diligence (CDD) Program including collection and verification of know your customer (KYC) information including Enhanced and Ongoing CDD controls;
  • Implement a ML/TF Risk Awareness Training Program for staff;
  • Implement a monitoring program to identify unusual and possibly suspicious customer activity, transactions and behaviour;
  • Establish a process to report suspicions and other activity specified by AML/CFT law and regulation;
  • Establish Record-keeping controls; and
  • Maintain the ML/TF Risk Assessment and the AML Program as the business and risks change.

How can AML Accelerate help?

AML Accelerate, drawing on unparalleled expertise and real-world experience, has developed an AML/CFT Program Manual for stockbrokers.

Our solutions deliver all the foundational AML/CFT materials including a ML/TF Risk Assessment, an AML/CFT Program, CDD Standards, and an AML Operating Manual, which you can tailor to your specific needs, ensuring your AML/CFT controls are commensurate with your business.

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