On May 6, FINRA published Regulatory Notice 19-18 which outlines an updated list of red flags related to customer due diligence and transaction monitoring. Of note, the new list provided to broker-dealers appears to be focused on addressing transparency and unusual activity by outlining risk characteristics of:
- Shell companies
- Foreign financial institutions
- Incomplete or out-of-date filings
- Inconsistent documentation
- "Seemingly" unrelated accounts with similar characteristics
- Irregular orders or money movements
For assistance in interpreting or implementing this updated guidance into your CIP or transaction monitoring program, contact us for a discussion.
Firms should also be aware of emerging areas of risk, such as risks associated with activity in digital assets. Regardless of whether such assets are securities, BSA/AML requirements, including SAR filing requirements apply, and firms should thus consider the relevant risks, monitor for suspicious activity and, as applicable, report any such activity. This Notice is intended to assist broker-dealers in complying with their existing obligations under BSA/AML requirements and does not create any new requirements or expectations. In addition, this Notice incorporates the red flags listed in NTM 02-21 so that firms can refer to this Notice only for examples of potential red flags.