Header graphic for print
Securities Compliance Sentinel Analysis of cutting-edge securities industry issues

Suspicious Activity Reports, FCMs and IBs, Is That A Marriage Made In Heaven

Posted in CFTC Compliance, Compliance and Supervision, Money Laundering, Uncategorized

Suspicious Activity Reports (SARs) have been a useful tool for financial institutions to report financial fraud while, at the same time, prohibiting the reporting institution from disclosing the existence of a SARs in response to a third-party request.  In 2010, the Financial Crimes Enforcement Network (FinCEN), amended this regulation to extend the prohibition against disclosure to futures commission merchants (FCMs) and introducing brokers (IBs).  The amendments permitted FCMs and IBs to make a SAR and related information available to any SRO that examines the FCM or IB. 

The CFTC has recently tweaked the playing field.  FCMs and IBs that are subject to examination by the National Futures Association are now requested to make all SARs, information revealing the existence of a SAR, and supporting documentation available to the NFA upon request.robber.jpg 

Just as important, the CFTC cautioned the NFA and its officers, directors employees and agents that they are prohibited from revealing the existence of a SAR, except as required to fulfill its self-regulatory duties upon the request of the CFTC.  If the NFA wants to disclose the existence of a SAR or related information to a third party, it must first seek the authorization of the CFTC. 

If you are an FCM or IB and you make a SAR, you are still obligated to keep the existence of the SAR a secret.  When faced with a request for a SAR (or even the existence of one) make sure you know who is requesting it.  Always look before you leap when it comes to protecting the secrecy of a SAR.

* Photo from freedigitalphotos.com