Regulatory Alerts2006-05-03
Added
Application of the Regulations regarding Special Due Diligence Programs for Certain Foreign Accounts to NSCC Fund/SERV Accounts
The Financial Crimes Enforcement Network clarifies that when a U.S. financial institution purchases or redeems mutual fund shares through the National Securities Clearing Corporation’s Fund/SERV system on behalf of a foreign financial institution, the mutual fund establishes and maintains an account for the U.S. financial institution rather than for the foreign customer. Consequently, the mutual fund is not required to treat the foreign financial institution as a correspondent account in this specific transaction scenario. If a foreign financial institution becomes a direct member of the National Securities Clearing Corporation, the mutual fund must treat that entity as a correspondent account subject to appropriate due diligence and monitoring.