Bank Secrecy Act Obligations of a U.S. Clearing Broker-Dealer Establishing a Fully Disclosed Clearing Relationship with a Foreign Financial Institution

Ruling
FIN-2008-R008
Issued: June 3, 2008
Subject: Bank Secrecy Act Obligations of a U.S. Clearing Broker-Dealer Establishing a Fully Disclosed Clearing Relationship with a Foreign Financial Institution Dear [ ]:
I am responding to your letter of April 15, 2008 to the Financial Crimes Enforcement Network (“FinCEN”), in which you seek an administrative ruling on the Bank Secrecy Act (“BSA”) obligations of a U.S. clearing broker-dealer (“clearing firm”) establishing a fully disclosed clearing relationship with a foreign financial institution (“foreign introducing firm”). Specifically, in this ruling we will clarify (1) whether a fully disclosed clearing agreement between a U.S. clearing firm and a foreign introducing firm is a correspondent account for the purposes of our regulations implementing section 312 of the USA PATRIOT Act (the “correspondent account rule”);1 (2) whether a clearing firm is obligated to regard the fully disclosed accounts of a foreign introducing firm as its own accounts for the purposes of complying with the customer identification program regulations (the “CIP rule”);2 and (3) whether we expect a clearing firm to obligate the foreign introducing firm to comply with the obligations of the CIP rule, the correspondent account rule, and other U.S. anti-money laundering regulations respecting any accounts it may introduce to the clearing firm on a fully disclosed basis. As you have described, your client is a small [foreign] broker who has customers that wish to invest in securities traded in the United States. Your client, which is a foreign financial institution as that term is defined in the regulations implementing the BSA,3 has been in discussions with a U.S. clearing firm with the intention of establishing a clearing and carrying relationship. The clearing firm and your client contemplate that your client will introduce accounts to the clearing firm according to the terms of a fully disclosed clearing agreement under which your client, operating as a foreign introducing