September 19, 2018

September 19, 2018

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September 18, 2018

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September 17, 2018

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NFA Proposes Amendments to Compliance Rule 2-9(c) and Interpretive Notice: Compliance Rule 2-9: FCM and IB Anti-Money Laundering Program

On June 15, the National Futures Association (NFA) submitted to the Commodity Futures Trading Commission proposed amendments to NFA Compliance Rule 2-9(c) and the NFA Interpretive Notice entitled Compliance Rule 2-9: FCM and IB Anti-Money Laundering (AML) Program (collectively, the Amendments). Rule 2-9(c) requires futures commission merchants (FCMs) and introducing brokers (IBs) to develop and implement anti-money laundering programs designed to achieve compliance with the requirements of the Bank Secrecy Act.

NFA proposed the Amendments in response to the Financial Crimes Enforcement Network’s (FinCEN) new regulations that (1) require financial institutions to identify and verify the identity of beneficial owners of legal entity customers and (2) amend the AML program requirements to require appropriate risk-based procedures to conduct ongoing customer due diligence. FCMs and IBs were required to comply with FinCEN’s new regulations prior to May 11.

The Amendments add a new clause 5 to Rule 2-9(c) requiring FCMs and IBs to establish appropriate risk-based procedures for conducting ongoing customer due diligence. Further, the Amendments amend the Interpretive Notice to:

  • add a section on identifying and verifying beneficial owners pursuant to FinCEN’s requirements;
  • add requirements that FCMs and IBs develop risk-based ongoing customer due diligence procedures in accordance with FinCEN’s requirements; and
  • clarify that FCMs and IBs should use the beneficial ownership information to help ensure that they are in compliance with the Office of Foreign Assets Control regulations.

NFA invoked the “ten-day” provision of Section 17(j) of the Commodity Exchange Act and, subject to possible CFTC review for approval, plans to make the Amendments effective 10 days after the CFTC’s receipt of the proposed amendments.

NFA proposed amendments are available here.

©2018 Katten Muchin Rosenman LLP

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About this Author

Kevin M. Foley, Finance Lawyer, Katten Llaw Firm
Partner

Kevin M. Foley has extensive experience in commodities law and advises a wide range of clients, both in the United States and abroad, on compliance with the Commodity Exchange Act and the rules of the Commodity Futures Trading Commission (CFTC) affecting traditional exchange-traded products, as well as the over-the-counter markets involving swaps and other derivative instruments. His clients include futures commission merchants, derivatives clearing organizations, designated contract markets, foreign boards of trade and an industry trade association.

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312-902-5372
Timothy Nolan, Katten Law Firm, Chicago, Corporate Law Attorney
Associate

Timothy Nolan concentrates his practice on transactional, corporate and regulatory aspects of financial services matters. Timothy is able to provide legal services to a wide variety of clients, including proprietary trading firms, hedge funds, broker-dealers, registered investment advisers, commodity trading advisers, financial institutions and general corporate clients.

Prior to joining Katten, Timothy served as the CEO and the president of the board of directors of a small commercial real estate company and spent 10 years in the scrap recycling industry, including several years as general manager of a mid-sized company. In his time in the scrap recycling industry, Timothy worked with traders, brokers, importers and exporters, and other industry professionals around the world relating to ferrous, non-ferrous and precious metal recycling, together with paper and plastic recycling.

312-902-5447