FinCEN clarifies AML rules for insurance firms

WASHINGTON, DC – The recent federal rules that mandate anti-money laundering (AML) programmes in insurance companies do not require the companies to implement customer identification programmes, according to new guidance from the Financial Crimes Network (FinCEN).

However, the agency says in its FAQs guidance that insurance companies that are subsidiaries of banking organisations should consult with their parent bank's primary Federal regulator regarding their obligation to obtain and retain customer-related information necessary to administer an effective anti-money laundering programme.

The rule requiring insurance companies to report suspicious activity has been in effect since May 2.

FinCEN also clarified the obligations of futures commission merchants subject to the final due diligence rules implementing section 312 of the USA Patriot Act (the "section 312 rules").

Broker agreements

Introducing brokers, who solicit orders from the public for the purchase or sale of commodity futures contracts, may not accept money, securities, or other property for the purpose of margining, guaranteeing, or securing solicited or accepted trades or contracts.

"The introducing broker will only enter into an agreement with a futures commission merchant, under which the introducing broker will introduce customers to the futures commission merchant.

"The introduced customer will establish an account directly with the futures commission merchant, in which the futures commission merchant will clear and carry the introduced customer's commodity futures trades until they are offset or settled," according to the guidance.

But for the purposes of correspondent accounts, the futures commission merchant will execute an account agreement directly with an introduced foreign financial institution so that it can accept money, securities, or other property to margin, guarantee, or secure trades or contracts cleared and carried for the foreign financial institution.

The execution of the account agreement by a futures commission merchant establishes a "formal relationship" with the introduced foreign financial institution, subjecting the futures commission merchant to compliance with the due diligence provisions of the correspondent account rule. OR&C