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News July 31, 2006 Issue

SEC Staff Extends BD AML Relief

Once again, the staff of the Division of Market Regulation has assured broker-dealers that they may rely on investment advisers to fulfill some of their anti-money laundering duties, even though investment advisers have not officially been brought into the AML fold. (And no, there’s still no predicting when that is going to happen.)

On July 11, the staff issued a no-action letter to the Securities Industry Association that effectively extends similar relief that had previously been granted in two earlier no-action letters.

Under the letter, a broker-dealer can rely on an adviser to fulfill certain aspects of its customer identification procedures, provided that:

  • the reliance is reasonable under the circumstances;
  • the adviser is SEC-registered (or otherwise regulated by a federal regulator); and
  • the adviser enters into a contract requiring it to certify annually to the broker-dealer that it has implemented an AML program and that it or its agent will perform specified requirements of the broker-dealer's customer identification program.