Firm Policy

It is the policy of the firm to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.

Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the “placement” stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler’s checks, or deposited into accounts at financial institutions. At the “layering” stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the “integration” stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.

Although cash is rarely deposited into securities accounts, the securities industry is unique in that it can be used to launder funds obtained elsewhere, and to generate illicit funds within the industry itself through fraudulent activities. Examples of types of fraudulent activities include insider trading, market manipulation, ponzi schemes, cybercrime and other investment-related fraudulent activity.

Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.

Our AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business.

 

AML Compliance Person Designation and Duties

The firm has designated the Managing Attorney as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the firm’s AML program. The Managing Attorney shall work with those who have a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge, and training to provide a regular review of all firm AML policies. The duties of the AML Compliance Person will include monitoring the firm’s compliance with AML obligations, overseeing communication and training for employees, and as necessary  NASD and FINRA rules. The AML Compliance Person will also ensure that the firm keeps and maintains all of the required AML records and will ensure that Suspicious Activity Reports (SARs) are filed with the Financial Crimes Enforcement Network (FinCEN) when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the firm’s AML program. 

 When necessary, the firm will provide FINRA with contact information for the AML Compliance Person through the FINRA Contact System (FCS), including: (1) name; (2) title; (3) mailing address; (4) email address; (5) telephone number; and (6) facsimile (if any). When necessary, the firm will promptly notify FINRA of any change in this information through FCS and will review, and if necessary update, this information within 17 business days after the end of each calendar year. The annual review of FCS information will be conducted by the Managing Attorney or his or her appointed person and will be completed with all necessary updates being provided no later than 17 business days following the end of each calendar year. In addition, if necessary, and there is any change to the information, the Managing Attorney will update the information promptly, but in any event not later than 30 days following the change.

Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions

FinCEN Requests Under USA PATRIOT Act Section 314(a)

We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning clients and transactions (a 314(a) Request) – if not restricted by attorney client confidentiality- by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure website. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, our Managing Attorney will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), the Managing Attorney (MA) or the designated point person for the MA will structure the search accordingly.

If MA searches our records and does not find a matching case or transaction, then MA will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search by printing a search self-verification document from FinCEN’s 314(a) Secure Information Sharing System confirming that your firm has searched the 314 (a) subject information against your records.

We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. MA will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of Clients’ nonpublic information.

We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request. Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the Client identification and verification requirements.

FinCEN Requests Under USA PATRIOT Act Section 314(a)

We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning clients and transactions (a 314(a) Request) – if not restricted by attorney client confidentiality- by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure website. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, our Managing Attorney will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), the Managing Attorney (MA) or the designated point person for the MA will structure the search accordingly.

If MA searches our records and does not find a matching case or transaction, then MA will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search by printing a search self-verification document from FinCEN’s 314(a) Secure Information Sharing System confirming that your firm has searched the 314 (a) subject information against your records.

We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. MA will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of Clients’ nonpublic information.

We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request. Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the Client identification and verification requirements.

FinCEN Requests Under USA PATRIOT Act Section 314(a)

We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning clients and transactions (a 314(a) Request) – if not restricted by attorney client confidentiality- by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, each individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure website. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, our Managing Attorney will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), the Managing Attorney (MA) or the designated point person for the MA will structure the search accordingly.

If MA searches our records and does not find a matching case or transaction, then MA will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search by printing a search self-verification document from FinCEN’s 314(a) Secure Information Sharing System confirming that your firm has searched the 314 (a) subject information against your records.

We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. MA will review, maintain and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of Clients’ nonpublic information.

We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request. Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the Client identification and verification requirements.

National Security Letters

We understand that the receipt of a National Security Letter (NSL) is highly confidential. We understand that none of our officers, employees or agents may directly or indirectly disclose to any person that the FBI or other federal government authority has sought or obtained access to any of our records. To maintain the confidentiality of any NSL we receive, we will process and maintain the NSL by storage in a physical file and backed-up on an encrypted network. If we file a SAR after receiving an NSL, the SAR will not contain any reference to the receipt or existence of the NSL. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity. 

Grand Jury Subpoenas
We understand that the receipt of a grand jury subpoena concerning a Client does not in itself require that we file a Suspicious Activity Report (SAR). When we receive a grand jury subpoena, we will conduct a risk assessment of the Client subject to the subpoena as well as review the Client’s case activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that Client’s risk assessment and file a SAR in accordance with the SAR filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents or the information we used to respond to it. To maintain the confidentiality of any grand jury subpoena we receive, we will process and maintain the subpoena by MA. If we file a SAR after receiving a grand jury subpoena, the SAR will not contain any reference to the receipt or existence of the subpoena. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.
Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)

We will share information with financial institutions regarding individuals, entities, organizations and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. MA will ensure that the firm files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s website. Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even to financial institutions with which we are affiliated, and that we will obtain the requisite notices from affiliates and follow all required procedures. 

We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the firm’s other books and records and run a full background check on any foreign nationals prior to engaging services with our firm.

We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:

  • identifying and, where appropriate, reporting on money laundering or terrorist activities;
  • determining whether to establish or maintain an case, or to engage in a transaction; or
  • assisting the financial institution in complying with performing such activities.

Checking the Office of Foreign Assets Control Listings

Before beginning work with any foreign nationals from countries in which U.S. sanctions are in place, and on an ongoing basis, MA or designated person will check to ensure that a client does not appear on the Specially Designated Nationals or Blocked Persons (SDN) list or is not engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC. (See the OFAC website for the SDN list and listings of current sanctions and embargoes). Because the SDN list and listings of economic sanctions and embargoes are updated frequently, we will consult them on a biannual basis and subscribe to receive any available updates when they occur. With respect to the SDN list, we may also access that list through various software programs to ensure speed and accuracy. See also FINRA’s OFAC Search Tool that screens names against the SDN list. MA will also review existing cases against the SDN list and listings of current sanctions and embargoes when they are updated and she will document the review.

If we determine that a client is on the SDN list or is engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC, we will reject will discontinue work on their file and issue a letter of disengagement.  We will also call the OFAC Hotline at (800) 540-6322 immediately.

Our review will include Client cases, transactions involving Clients (including activity that passes through the firm such as wires) and the review of Client transactions that involve physical security certificates or application-based investments (e.g., mutual funds).

 

Client Identification Program

We do not open or maintain Client cases within the meaning of 31 CFR 1023.100, in that we do not establish formal relationships with “Clients” for the purpose of effecting transactions in securities. If in the future the firm elects to open Client cases or to establish formal relationships with Clients for the purpose of effecting transactions in securities, we will first establish, document and ensure the implementation of appropriate CIP procedures. Firm will run a background check on all foreign nationals that engage the firm for services.

Required Client Information

Prior to opening a case, MA will collect the following information for all cases, if applicable, for any person, entity or organization that is opening a new case and whose name is on the case: 

(1) the name;

(2) date of birth (for an individual);

(3) an address, which will be a residential or business street address (for an individual), an Army Post Office (APO) or Fleet Post Office (FPO) box number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office, or other physical location (for a person other than an individual); and

(4) an identification number, which will be a taxpayer identification number (for U.S. persons), or one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard (for non-U.S. persons). 

In the event that a Client has applied for, but has not received, a taxpayer identification number, we will perform a full background check to any foreign nationals to confirm that the application was filed, before the Client engages our firm for services or within 60 days of engaging services, to obtain the taxpayer identification number within a reasonable period of time after the case is opened.  When engaging our services with a foreign business or enterprise that does not have an identification number, we will request alternative government-issued documentation certifying the existence of the business or enterprise.

Clients Who Refuse to Provide Information

If a potential or existing Client either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, our firm will not continue work on their file and, after considering the risks involved, will consider closing any existing case. In either case, our AML Compliance Person will be notified so that we can determine whether we should report the situation to FinCEN on a SAR. 

Verifying Information

Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our Clients by using risk-based procedures to verify and document the accuracy of the information we receive about our Clients. Foreign nationals must authorize a background check before our firm will be authorized to complete work.  MA will analyze the information we obtain to determine whether the information is sufficient to form a reasonable belief that we know the true identity of the Client (e.g., whether the information is logical or contains inconsistencies).   

We will verify Client identity through documentary means, non-documentary means or both and will run a full background check on all foreign nationals.  We will use documents to verify Client identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever necessary. We may also use non-documentary means, if we are still uncertain about whether we know the true identity of the Client. In verifying the information, we will consider whether the identifying information that we receive, such as the Client’s name, street address, zip code, telephone number (if provided), date of birth and Social Security number, allow us to determine that we have a reasonable belief that we know the true identity of the Client (e.g., whether the information is logical or contains inconsistencies). 

Appropriate documents for verifying the identity of Clients include the following:

  • A full background check for foreign nationals. 
  • For an individual, an unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and
  • For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement or a trust instrument.

We understand that we are not required to take steps to determine whether the document that the Client has provided to us for identity verification has been validly issued and that we may rely on a government-issued identification as verification of a Client’s identity. If, however, we note that the document shows some obvious form of fraud, we must consider that factor in determining whether we can form a reasonable belief that we know the Client’s true identity.

We will use the following non-documentary methods of verifying identity:

  • Independently verifying the Client identity through the comparison of information provided by the Client with information obtained from a consumer reporting agency, public database or other source background source.
  • Checking references with other financial institutions; or
  • Obtaining a financial statement.

We will use non-documentary methods of verification when:

(1) the Client is unable to present an unexpired government-issued identification document with a photograph or other similar safeguard;

(2) the firm is unfamiliar with the documents the Client presents for identification verification;

(3) the Client and firm do not have face-to-face contact; and

(4) there are other circumstances that increase the risk that the firm will be unable to verify the true identity of the Client through documentary means. 

We will verify the information within a reasonable time before or after Client engages firm for services. Depending on the nature of the case and requested transactions, we may refuse to complete a transaction before we have verified the information, or in some instances when we need more time, we may, pending verification, restrict the types of transactions or dollar amount of transactions. If we find suspicious information that indicates possible money laundering, terrorist financing activity, or other suspicious activity, we will, after internal consultation with the firm’s AML Compliance Person, file a SAR in accordance with applicable laws and regulations.

We recognize that the risk that we may not know the Client’s true identity may be heightened for certain types of client matters, such as a client request to open in the name of a corporation, partnership or trust that is created or conducts substantial business in a jurisdiction that has been designated by the U.S. as a primary money laundering jurisdiction, a terrorist concern, or has been designated as a non-cooperative country or territory. We will identify Clients that pose a heightened risk of not being properly identified. We will also take the following additional measures that may be used to obtain information about the identity of the individuals associated with the Client when standard documentary methods prove to be insufficient.

Lack of Verification

When we cannot form a reasonable belief that we know the true identity of a Client, we will do the following: (1) not engage services; (2) impose terms under which a Client may conduct transactions while we attempt to verify the Client’s identity; (3) discontinue services after attempts to verify a Client’s identity fail; and (4) determine whether it is necessary to file a SAR in accordance with applicable laws and regulations.

Recordkeeping

We will document our verification, including all identifying information provided by a Client, the methods used and results of verification, and the resolution of any discrepancies identified in the verification process. We will keep records containing a description of any document that we relied on to verify a Client’s identity, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to non-documentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a Client. We will also keep records containing a description of the resolution of each substantive discrepancy discovered when verifying the identifying information obtained. We will retain records of all identification information for five years after the case has been closed; we will retain records made about verification of the Client’s identity for five years after the record is made.

Comparison with Government-Provided Lists of Terrorists

At such time as we receive notice that a federal government agency has issued a list of known or suspected terrorists and identified the list as a list for CIP purposes, we will, within a reasonable period of time after a client has engaged services (or earlier, if required by another federal law or regulation or federal directive issued in connection with an applicable list), determine whether a Client appears on any such list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators. We will follow all federal directives issued in connection with such lists.   

We will continue to comply separately with OFAC rules prohibiting transactions with certain foreign countries or their nationals.

Notice to Clients

We will provide notice to Clients that the firm is requesting information from them to verify their identities, as required by federal law. We will use email directly to the Client to provide notice to Clients.

Important Information About Procedures for Engaging our firm.

To help the government fight the funding of terrorism and money laundering activities, we will verify the identity of all foreign nationals and request a valid government issued identification when you engage the services of our firm.

What this means for you

When you engage the services of our firm, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

Reliance on Another Financial Institution for Identity Verification

We may, under the following circumstances, rely on the performance by a financial institution (including an affiliate) of some or all of the elements of our CIP with respect to any Client that is opening a case or has established a case or similar business relationship with the other financial institution to provide or engage in services, dealings or other financial transactions:

  • when such reliance is reasonable under the circumstances;
  • when the financial institution is subject to a rule implementing the anti-money laundering compliance program requirements of 31 U.S.C. § 5318(h), and is regulated by a federal functional regulator; and
  • when the financial institution has entered into a contract with our firm requiring it to certify annually to us that it has implemented its anti-money laundering program and that it will perform (or its agent will perform) specified requirements of the Client identification program.

Client Due Diligence Rule

We do not open or maintain bank accounts for Clients within the meaning of 31 CFR 1010.230. If in the future the firm elects to open accounts for legal entity Clients, we will first establish, document and ensure the implementation of appropriate CDD procedures. (Note that a change in the firm’s business to accept accounts for legal entity Clients may be a material change in business requiring an application, review and approval by FINRA. See NASD Rule 1017).

Understanding the Nature and Purpose of Client Relationships

We will understand the nature and purpose of Client relationships for the purpose of developing a Client risk profile through the following methods.  Depending on the facts and circumstances, a Client risk profile may include such information as:

  • The type of Client;
  • The account or service being offered;
  • The Client’s income;
  • The Client’s net worth;
  • The Client’s domicile;
  • The Client’s principal occupation or business; and
  • In the case of existing Clients, the Client’s history of activity.
Conducting Ongoing Monitoring to Identify and Report Suspicious Transactions

We will conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, maintain and update Client information, including information regarding the beneficial ownership of legal entity Clients, using the Client risk profile as a baseline against which Client activity is assessed for suspicious transaction reporting. Our suspicious activity monitoring procedures in this AML policy.

Due Diligence and Enhanced Due Diligence Requirements for Correspondent Accounts of Foreign Financial Institutions

Due Diligence for Correspondent Accounts of Foreign Financial Institutions

We have reviewed our accounts and we do not have, nor do we intend to open or maintain, correspondent accounts for foreign financial institutions for third parties outside of our law firm.  We will ensure that any requests made of our organization are reviewed and denied if they are international.

Enhanced Due Diligence

We will assess any correspondent accounts for foreign financial institutions to determine whether they are correspondent accounts that have been established, maintained, administered or managed for any foreign bank that operates under: 

(1) an offshore banking license;

(2) a banking license issued by a foreign country that has been designated as non-cooperative with international anti-money laundering principles or procedures by an intergovernmental group or organization of which the United States is a member and with which designation the U.S. representative to the group or organization concurs; or

(3) a banking license issued by a foreign country that has been designated by the Secretary of the Treasury as warranting special measures due to money laundering concerns.

If we determine that we have any correspondent accounts for these specified foreign banks, we will perform enhanced due diligence on these correspondent accounts. The enhanced due diligence that we will perform for each correspondent account will include, at a minimum, procedures to take reasonable steps to:

(1)       conduct enhanced scrutiny of the correspondent account to guard against money laundering and to identify and report any suspicious transactions. Such scrutiny will not only reflect the risk assessment that is described in Section 8.a. above, but will also include procedures to, as appropriate:

Special Procedures When Due Diligence or Enhanced Due Diligence Cannot Be Performed

In the event there are circumstances in which we cannot perform appropriate due diligence with respect to a correspondent account, we will determine, at a minimum, whether to refuse to open the account, suspend transaction activity, file a SAR, close the correspondent account and/or take other appropriate action.

Monitoring Accounts for Suspicious Activity

We will Client matters for legal matters with activity that involve an unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to our business. (Red flags are identified in Section 11.b. below.) Monitoring will be conducted through a regular review of client cases.  The Client risk profile will serve as a baseline for assessing potentially suspicious activity. The AML Compliance Person or his or her designee will be responsible for this monitoring, will review any activity that our monitoring system detects, will determine whether any additional steps are required, will document when and how this monitoring is carried out, and will report suspicious activities to the appropriate authorities.

Emergency Notification to Law Enforcement by Telephone

In situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, we will immediately call an appropriate law enforcement authority. If a Client or company appears on OFAC’s SDN list, we will call the OFAC Hotline at (800) 540-6322. Other contact numbers we will use are: FinCEN’s Financial Institutions Hotline ((866) 556-3974) (especially to report transactions relating to terrorist activity), local U.S. Attorney’s office (insert contact number), local FBI office (insert contact number) and local SEC office (insert contact number) (to voluntarily report such violations to the SEC in addition to contacting the appropriate law enforcement authority). If we notify the appropriate law enforcement authority of any such activity, we must still file a timely a SAR.

Although we are not required to, in cases where we have filed a SAR that may require immediate attention by the SEC, we may contact the SEC via the SEC SAR Alert Message Line at (202) 551-SARS (7277) to alert the SEC about the filing. We understand that calling the SEC SAR Alert Message Line does not alleviate our obligations to file a SAR or notify an appropriate law enforcement authority.

Red Flags

Red flags that signal possible money laundering or terrorist financing include, but are not limited to:

Potential Red Flags in Client Due Diligence and Interactions with Clients

  • The Client provides the firm with unusual or suspicious identification documents that cannot be readily verified or are inconsistent with other statements or documents that the Client has provided. Or, the Client provides information that is inconsistent with other available information about the Client. This indicator may apply to case openings and to interaction subsequent to case opening.
  • The Client is reluctant or refuses to provide the firm with complete Client due diligence information as required by the firm’s procedures, which may include information regarding the nature and purpose of the Client’s business, prior financial relationships, anticipated case activity, business location and, if applicable, the entity’s officers and directors.
  • The Client refuses to identify a legitimate source of funds or information is false, misleading or substantially incorrect.
  • The Client is domiciled in, doing business in or regularly transacting with counterparties in a jurisdiction that is known as a bank secrecy haven, tax shelter, high-risk geographic location (g., known as a narcotics producing jurisdiction, known to have ineffective AML/Combating the Financing of Terrorism systems) or conflict zone, including those with an established threat of terrorism.
  • The Client has difficulty describing the nature of his or her business or lacks general knowledge of his or her industry.
  • The Client has no discernable reason for using the firm’s service or the firm’s location (g., the Client lacks roots to the local community or has gone out of his or her way to use the firm).
  • The Client has been rejected or has had its relationship terminated as a Client by other financial services firms.
  • The Client’s legal or mailing address is associated with multiple other cases or businesses that do not appear related.
  • The Client appears to be acting as an agent for an undisclosed principal, but is reluctant to provide information.
  • The Client is a trust, shell company or private investment company that is reluctant to provide information on controlling parties and underlying beneficiaries.
  • The Client is publicly known or known to the firm to have criminal, civil or regulatory proceedings against him or her for crime, corruption or misuse of public funds, or is known to associate with such persons. Sources for this information could include news items, the Internet or commercial database searches.
  • The Client’s background is questionable or differs from expectations based on business activities.
  • The Client maintains multiple cases, or maintains cases in the names of family members or corporate entities, with no apparent business or other purpose.
  • A case is opened by a politically exposed person (PEP),9 particularly in conjunction with one or more additional risk factors, such as the case being opened by a shell company10 beneficially owned or controlled by the PEP, the PEP is from a country which has been identified by FATF as having strategic AML regime deficiencies, or the PEP is from a country known to have a high level of corruption.
  • A case is opened by a non-profit organization that provides services in geographic locations known to be at higher risk for being an active terrorist threat.11
  • A case is opened in the name of a legal entity that is involved in the activities of an association, organization or foundation whose aims are related to the claims or demands of a known terrorist entity.12
  • An account is opened for a purported stock loan company, which may hold the restricted securities of corporate insiders who have pledged the securities as collateral for, and then defaulted on, purported loans, after which the securities are sold on an unregistered basis.
  • An account is opened in the name of a foreign financial institution, such as an offshore bank or broker-dealer, that sells shares of stock on an unregistered basis on behalf of Clients.
  • An account is opened for a foreign financial institution that is affiliated with a U.S. broker-dealer, bypassing its U.S. affiliate, for no apparent business purpose. An apparent business purpose could include access to products or services the U.S. affiliate does not provide.

Potential Red Flags in Money Movements

  • The Client attempts or makes frequent or large deposits of currency, insists on dealing only in cash equivalents, or asks for exemptions from the firm’s policies and procedures relating to the deposit of cash and cash equivalents.
  • The Client “structures” deposits, withdrawals or purchases of monetary instruments below a certain amount to avoid reporting or recordkeeping requirements, and may state directly that they are trying to avoid triggering a reporting obligation or to evade taxing authorities.
  • The Client seemingly breaks funds transfers into smaller transfers to avoid raising attention to a larger funds transfer. The smaller funds transfers do not appear to be based on payroll cycles, retirement needs, or other legitimate regular deposit and withdrawal strategies.
  • The Client’s account or case shows numerous currency, money order (particularly sequentially numbered money orders) or cashier’s check transactions aggregating to significant sums without any apparent business or lawful purpose.
  • The Client frequently changes bank account details or information for redemption proceeds, in particular when followed by redemption requests.
  • The Client makes a funds deposit followed by an immediate request that the money be wired out or transferred to a third party, or to another firm, without any apparent business purpose.
  • Wire transfers are made in small amounts in an apparent effort to avoid triggering identification or reporting requirements.
  • Incoming payments are made by third-party checks or checks with multiple endorsements.
  • Outgoing checks to third parties coincide with, or are close in time to, incoming checks from other third parties.
  • Payments are made by third party check or money transfer from a source that has no apparent connection to the Client.
  • Wire transfers are made to or from financial secrecy havens, tax havens, high-risk geographic locations or conflict zones, including those with an established presence of terrorism.
  • Wire transfers originate from jurisdictions that have been highlighted in relation to black market peso exchange activities.
  • The Client engages in transactions involving foreign currency exchanges that are followed within a short time by wire transfers to locations of specific concern (g., countries designated by national authorities, such as FATF, as non-cooperative countries and territories).
  • The parties to the transaction (g., originator or beneficiary) are from countries that are known to support terrorist activities and organizations.
  • Wire transfers or payments are made to or from unrelated third parties (foreign or domestic), or where the name or account number of the beneficiary or remitter has not been supplied.
  • There is wire transfer activity that is unexplained, repetitive, unusually large, shows unusual patterns or has no apparent business purpose.
  • The securities account is used for payments or outgoing wire transfers with little or no securities activities (e., account appears to be used as a depository account or a conduit for transfers, which may be purported to be for business operating needs).
  • Funds are transferred to financial or depository institutions other than those from which the funds were initially received, specifically when different countries are involved.
  • The Client engages in excessive journal entries of funds between related or unrelated accounts without any apparent business purpose.
  • The Client uses a personal/individual account for business purposes or vice versa.
  • A foreign import business with U.S. accounts receives payments from outside the area of its Client base.
  • There are frequent transactions involving round or whole dollar amounts purported to involve payments for goods or services.
  • Upon request, a Client is unable or unwilling to produce appropriate documentation (g., invoices) to support a transaction, or documentation appears doctored or fake (e.g., documents contain significant discrepancies between the descriptions on the transport document or bill of lading, the invoice, or other documents such as the certificate of origin or packing list).
  • The Client requests that certain payments be routed through nostro14 or correspondent accounts held by the financial intermediary instead of its own accounts, for no apparent business purpose.
  • Funds are transferred into an account and are subsequently transferred out of the account in the same or nearly the same amounts, especially when the origin and destination locations are high-risk jurisdictions.
  • A dormant account suddenly becomes active without a plausible explanation (g., large deposits that are suddenly wired out).
  • Nonprofit or charitable organizations engage in financial transactions for which there appears to be no logical economic purpose or in which there appears to be no link between the stated activity of the organization and the other parties in the transaction.
  • There is unusually frequent domestic and international automated teller machine (ATM) activity.
  • A person customarily uses the ATM to make several deposits into a brokerage account below a specified BSA/AML reporting threshold.
  • Many small, incoming wire transfers or deposits are made using checks and money orders that are almost immediately withdrawn or wired out in a manner inconsistent with the Client’s business or history; the checks or money orders may reference in a memo section “investment” or “for purchase of stock.” This may be an indicator of a Ponzi scheme or potential funneling activity.
  • Wire transfer activity, when viewed over a period of time, reveals suspicious or unusual patterns, which could include round dollar, repetitive transactions or circuitous money movements.

Other Potential Red Flags

  • The Client is reluctant to provide information needed to file reports to proceed with the transaction.
  • The Client exhibits unusual concern with the firm’s compliance with government reporting requirements and the firm’s AML policies.
  • The Client tries to persuade an employee not to file required reports or not to maintain the required records.
  • Notifications received from the broker-dealer’s clearing firm that the clearing firm had identified potentially suspicious activity in Client accounts. Such notifications can take the form of alerts or other concern regarding negative news, money movements or activity involving certain securities.
  • Law enforcement has issued subpoenas or freeze letters regarding a Client or account at the securities firm.
  • The Client makes high-value transactions not commensurate with the Client’s known income or financial resources.
  • The Client wishes to engage in transactions that lack business sense or an apparent investment strategy, or are inconsistent with the Client’s stated business strategy.
  • The stated business, occupation or financial resources of the Client are not commensurate with the type or level of activity of the Client.
  • The Client engages in transactions that show the Client is acting on behalf of third parties with no apparent business or lawful purpose.
  • The Client engages in transactions that show a sudden change inconsistent with normal activities of the Client.
  • Securities transactions are unwound before maturity, absent volatile market conditions or other logical or apparent reason.
  • The Client does not exhibit a concern with the cost of the transaction or fees (g., surrender fees, or higher than necessary commissions).
  • A borrower defaults on a cash-secured loan or any loan that is secured by assets that are readily convertible into currency.
  • There is an unusual use of trust funds in business transactions or other financial activity.
Responding to Red Flags and Suspicious Activity

When an employee of the firm detects any red flag, or other activity that may be suspicious, he or she will notify the MA.  Under the direction of the AML Compliance Person, the firm will determine whether or not and how to further investigate the matter. This may include gathering additional information internally or from third-party sources, contacting the government, freezing the account and/or filing a SAR.

Senior Manager Approval 

Senior management has approved this AML compliance program in writing as reasonably designed to achieve and monitor our firm’s ongoing compliance with the requirements of the BSA and the implementing regulations under it. This approval is indicated by signatures below.

Signed:            Nouvelle L. Gonzalo, Esq.

Title:               Managing Attorney of Gonzalo Law

Date:               2021-2025