Understanding the Importance of an Annual AML Audit
The AML (anti-money laundering) program consists of some very strict guidelines referred to as AML policies and procedure as well as an annual AML audit. Let the information here help you to learn the procedures involving the annual AML Audit and all it entails.
Why is the Annual AML Audit Required?
As a result of the events on 9/11, the USA Patriot Act of 2001 was created to protect our markets and financial institutions from money laundering, possible terrorist financing, and attacks. As part of the USA Patriot Act, section 352, all brokers (IBs), commission merchants, and NASD broker/dealer firms are to have an AML (anti-money laundering) program developed, implemented and in place. In addition to the AML program, they are also required to have a compliance officer at their business as well as an annual AML Audit.
What are the Requirements of the annual AML audit?
The annual AML Audit must be provided for every calendar year by an independent auditor. Its purpose is to test the compliance of the AML programs to ensure they are up to the required AML policies and procedures. This annual audit must be an independent audit, which means it must be performed by a qualified outside party. It can be performed by a member of the personnel if they do not have customer accounts at that firm, or execute customer transactions. If they act as broker introducing customers to new accounts, they cannot perform the audit either.
Because many small firms may not have employees that are not somehow connected to accounts, they often hire outside, independent agents to perform their annual AML audit. This is often easier, less confusing, and more "accountable" in the case of a discrepancy in the annual AML audit. It is also, in most cases, a very reliable and cost-effective way to get your AML compliance taken care of efficiently.
While it's called an "annual" audit, it's performed on a calendar year basis. The results, consisting of a fully documented report, of the AML audit are submitted to the senior personnel members of the firm or financial institutions.
What does the Annual AML Audit Entail?
There are many parts of an annual AML audit as required by the USA Patriot Act. Some of the most common things that are observed and documented are how the firms handle document retention, money transfers, suspicious activity reporting, activity monitory, training, and account opening.
In addition, the annual AML audit entails ensuring that the firm is in compliance with:
• FINRA Rule 3011
• The USA Patriot Act of 2001
• OFAC requirements
• FinCEN Section 311 notifications
• Section 312 requirements
• FinCEN 314a requests
The annual AML Audit also checks as to the firms' methods of determining customer identification, dealing with red flags, SWIFT transfers, distribution of all AML policies and procedures to members of the firm and how they handle suspicious activity. They also request that right to view the annual AML audit from the previous year.
