7.3.8.2. Detection and Reporting of Suspicious Activity
All FCMs and IBs are required to establish and implement a set of procedures designed to detect and report suspicious activities. Suspicious activities are those that have no apparent business or lawful purpose, are unusual for the particular customer, or lack any reasonable explanation. Firms must train staff to identify suspicious behavior and monitor cash and trading activity.
After the passage of the PATRIOT Act, the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) coordinated an effort with five federal banking agencies to provide guidance in developing and examining anti–money laundering compliance programs across the financial industry. One of their activities has been to compile a list of suspicious activities it calls “red flags,” which may indicate money laundering or terrorist financing and demand particular scrutiny. Firms should provide employees with examples of behavior or activity that should raise a red flag and cause further inquiry. Some examples include:
- • A corporate customer lacks general knowledge of its own industry
- • A customer is unconcerned with risks, commissions, or other costs associated with trading
- • A customer a