Comment Letter on Fincen's Advance Notice of Proposed Rulemaking on Anti-Money Laundering Program Effectiveness

Abstract

We submitted these comments in response to the Financial Crimes Enforcement Network's advance notice of proposed rulemaking on the definition of an "effective and reasonably designed" anti-money laundering program applicable broadly to financial institutions. Our comments highlight industry-specific obligations of brokers and dealers in securities to have reasonably designed anti-money-laundering programs.

We argue that in undertaking future rulemaking, FinCEN should account for industry-specific statutory requirements, and how these bear on regulators’ experiences implementing AML program obligations analogous to those the advance notice of proposed rulemaking contemplates. Regulators’ experience enforcing compliance with FINRA's informal guidance under the Securities Exchange Act of 1934, for instance, raises questions about whether FinCEN’s proposals to elaborate on AML obligations through periodic guidance would impose obligations enforceable at all. In particular, FinCEN should carefully consider whether essential enforcement regimes will require additional rulemaking because simply issuing official guidance may not create fully enforceable obligations in all regulatory frameworks. For self-regulatory organizations overseen by the SEC, guidance alone may not suffice to create an enforceable obligation. In instances where the SEC reviews SRO enforcement actions, it considers whether conduct violated the SRO's “rules,” meaning rules approved by the SEC. As explained in greater detail below, official guidance may not meet this standard, creating doubt, enforcement challenges, and likely inhibiting FinCEN’s compliance objectives.