NASD and NYSE Adopt New Requirements Regarding Member’s AML Compliance Programs
NASD and NYSE have recently issued notices describing new requirements regarding member firms’ anti-money laundering (AML) compliance programs. On February 3, 2006, NYSE issued Information Memo 06-4 and on February 10, 2006, NASD issued Notice to Members 06-07 describing the changes to their respective AML compliance program requirements. The new NYSE requirements are now in effect, and the new NASD requirements become effective on March 6, 2006.
NYSE Rule 445 and NASD Rule 3011 generally require a member firm to develop and implement a written AML program reasonably designed to achieve and monitor the firm’s compliance with the requirements of the Bank Secrecy Act and the implementing regulations promulgated thereunder by the Department of Treasury. Among other things, those rules require that a firm’s AML program provide for independent testing for compliance with the AML program. In addition, the rules require that firms designate and identify to NYSE and NASD an individual or individuals responsible for implementing and monitoring the day-to-day operations and internal controls of the firm’s AML program and to update this information as appropriate. The new requirements clarify and provide guidance on these two aspects of the AML compliance program rules.
Independent Testing
NYSE Rule 445(3) and NASD Rule 3011(c) require that a firm’s AML program provide for independent testing for compliance to be conducted by member personnel or by a qualified outside party. Those requirements have been amended to clarify that most firms will be expected to perform the independent test at least once each calendar year. In addition, the amendments to the AML compliance program rules clarify certain types of individuals who are not considered to be "independent," and, hence, not eligible to perform the required independent testing.
AML Compliance Person
As amended, NASD Rule 3011(d) clarifies that the AML compliance person is an "associated person" of the member firm. Similarly, NYSE Rule 445(4) now provides that the AML compliance person may either be an employee of the member firm or, with the prior approval of the NYSE, an employee of a parent, affiliate, or subsidiary of the member firm. Additionally, NASD IM-3011-2 will require each firm to review and, if necessary, update the information regarding its AML compliance person within 17 business days after the end of each calendar quarter.
View NASD Notice to Members 06-07
View NYSE Information Memo 06-4
Securities Industry FYI is a service of the Broker-Dealer Practice of Morgan Lewis. If you have any questions concerning these important legal developments, please contact any member of Morgan Lewis’s Broker-Dealer Practice, including:
Washington, D.C.
Beth D. Kiesewetter
202.739.5127
bkiesewetter@morganlewis.com