RegAlert2006-05-10
Added · Updated
Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to the Securities and Futures Industries
The Financial Crimes Enforcement Network clarifies that securities and futures firms may apply a risk-based approach to the five enumerated due diligence factors for correspondent accounts, requiring only those factors relevant to the specific risk profile of the foreign financial institution. Clearing firms are not required to look through omnibus accounts to perform due diligence on underlying accountholders, nor are they obligated to treat introduced private banking accounts as their own unless they impose aggregate minimum account requirements of not less than $1,000,000 or assign a liaison. Firms must determine if a foreign entity is a foreign financial institution through a reasonable inquiry into its business functions rather than complex legal analysis, and must evaluate the anticipated securities or futures trading activity of a correspondent account in addition to fund movements.
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FIN-2006-G009
Issued Date
Guidance Subject
Application of the Regulations Requiring Special Due Diligence Programs for Certain Foreign Accounts to the Securities and Futures Industries
The Financial Crimes Enforcement Network is issuing this guidance to clarify the due diligence obligations of broker-dealers, futures commission merchants, and introducing brokers in commodities (collectively, “securities and futures firms”) under the final rules implementing section 312 of the USA PATRIOT Act (the “section 312 rules”).
Specifically, this guidance addresses: (1) whether all five of the risk factors enumerated in the final due diligence rule for correspondent accounts established or maintained for foreign financial institutions (the “correspondent account rule”) must be applied in every instance in which securities and futures firms establish, maintain, administer, or manage such accounts; (2) how certain intermediated relationships should be treated for purposes of the correspondent account rule; (3) how the due diligence rule for private banking accounts (the “private banking rule”) applies to clearing firms; (4) how firms should determine whether a foreign entity is a “foreign financial institution” under the section 312 rules; and (5) how securities and futures firms should evaluate the purpose and anticipated activity of a correspondent account.
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Lineage: In force
Source: Financial Crimes Enforcement Network — original document · Summary generated with machine assistance and reviewed before publication; the authoritative text is the regulator's original document. How RegAlert works