Specialised Solutions for Brokers’ AML/CFT Compliance Management

We offer a comprehensive set of anti-money laundering (AML), counter-terrorist financing (CFT), and fraud prevention solutions for brokers’ anti-money laundering compliance that are tailored to applicable AML/CTF (aka CTF) laws, regulations, AML/CTF supervisors' guidance for different types of brokers, sector-specific red flags and indicators, to help your business meet applicable obligations that cover brokers’ money laundering and terrorist financing risk mitigation, fraud prevention, the detection and handling of other types of financial crime.

 

We have designed our AML solutions to help you navigate the complexities of AML requirements for brokers in a commercially oriented and goal-focused manner, providing effective AML/CTF support for all aspects of brokers’ AML/CFT compliance, including but not limited to:

• Business Profile and Strategic Factors:
• Your commercial objectives
• Your products
• The size and structure of your business
• Your available AML/CTF compliance technology and resourcing
• Your risk appetite for AML/CTF-related risks
• Your governance framework and reporting lines
• Your client demographics
•  Your countries of operation

 

• Applicable Regulatory and Fraud Prevention Obligations:
• AML/CTF regulations for brokering providers
• Any brokers’ fraud prevention obligations or expectations your business may be subject to
• Any related compliance obligations, including, but not limited to, brokers’ obligations under:

• Privacy laws
• Financial market laws
• Fair trading laws
• Financial licensing requirements
• Other relevant regulatory frameworks

• Operational AML/CTF Compliance Requirements:

• Money laundering and terrorist financing (ML/TF) risk assessment
• AML risk management
• Customer due diligence (CDD) and Know Your Customer (KYC) obligations for brokers
• Enhanced customer due diligence
• Ongoing customer due diligence and transaction monitoring
• PEP identification and sanctions compliance
• Staff vetting and AML/CTF training
• Ad-hoc and periodic reporting
• Other obligations relating to brokers' anti-money laundering, counter-terrorist financing and sanctions compliance, as well as financial crimes prevention

 

 

What Jurisdictions Do Our Brokers’ AML Solutions Cover?

• Brokers’ AML Solutions in Australia: Brokers' AML requirements in Australia are outlined under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 and AML/CTF Rules, supervised by the Australian Transaction Reports and Analysis Centre (AUSTRAC).
• Brokers’ AML Solutions in New Zealand: Brokers' AML obligations in New Zealand are regulated under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009, overseen by the Financial Markets Authority (FMA).
• Brokers’ AML Solutions in the United Kingdom: Brokers' AML compliance requirements in the UK are defined by the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 and their subsequent amendments, with supervision by the Financial Conduct Authority (FCA).
• Brokers’ AML Solutions in the United States: Brokers' AML obligations in the U.S. are governed by the Bank Secrecy Act (BSA) and the USA PATRIOT Act, enforced by the Financial Crimes Enforcement Network (FinCEN). Additional oversight is provided by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
• Brokers’ AML Solutions in the European Union: Brokers' AML requirements across the EU are based on the Sixth Anti-Money Laundering Directive (AMLD6) and the Markets in Financial Instruments Directive II (MiFID II), enforced by National Competent Authorities (NCAs) with coordination by the European Securities and Markets Authority (ESMA).
• Brokers’ AML Solutions in Singapore: Brokers' AML obligations in Singapore are stipulated under laws such as the Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act, regulated by the Monetary Authority of Singapore (MAS) through AML/CFT Notices and Guidelines.

 

Which Types of Brokers Do We Support?

Focusing on money laundering (ML), terrorism financing (TF) mitigation, and fraud prevention, our brokers' AML solutions cover the following types of brokerage service providers and institutions that are deemed AML/CTF designated service providers (aka “reporting entities”):

• Stockbrokers
• Broker-Dealers
• Forex Brokers
• Commodity Brokers
• Derivatives Brokers
• CFD Brokers and CFD FX Brokers
• Online Trading Platforms
• Introducing Brokers
• Finance Brokers
• Mortgage Brokers
• Other financial institutions and businesses subject to the AML requirements for brokers

 

Brokers’ AML Advisory and Support

Our AML/CFT advisory services for brokers include, but are not limited to, the following:

• Detailed AML/CTF compliance advice: Tailored to the AML requirements for brokers for different processes, including but not limited to customer due diligence (CDD), transaction risk scoring, transaction monitoring, customer onboarding and know-your-customer (KYC) analysis, and other AML processes. Also tailored to the specific money laundering and terrorist financing (ML/TF) risks involved in these processes, helping you with effective ML/TF risk management.
• Brokers' fraud risk management advice: Advising on measures, controls, and processes for detecting, preventing, and responding to different types of fraud, scams, and other types of financial crime relevant to brokers. Also, tailored to brokers’ fraud environment, risk management practices, and stakeholders' expectations and obligations (banks, regulators, insurers, shareholders, etc.).

 

• Banking relationships advice: Advising broking firms and service providers on AML/CTF issues related to maintaining and expanding their banking relationships, complying with banks' AML/CTF risk appetite standards, recall procedures and expectations, and other operational requirements.
• Operational AML/CTF advice: Advising support and KYC teams on day-to-day onboarding, support queue management processes, allocating AML/CFT resources effectively, and making operational improvements to enhance overall customer experience and AML compliance efficiency.
• Specific matter advice (difficult clients, high ML/TF risk matters, customer due diligence for high-net-worth clients, complex transactions and more): Advising on handling specific AML/CTF issues related to clients and complex and unusual transactions, including assessing the adequacy of Sources of Wealth (SOW) or Source of Funds (SOF) information and documentation for specific enhanced due diligence (EDD) cases.
• Peer benchmarking and best practices: Helping brokers compare their AML/CFT practices with industry standards, AML/CTF supervisor guidance, and internationally recognised best practices set up by international organisations like the Financial Action Task Force (FATF) for complying with brokers' AML/CFT obligations.
• Government agencies liaison advice: Advising senior management and compliance teams on handling relationships with external bodies, including AML/CTF supervisors and law enforcement agencies, such as the FIU or its local equivalents.
• AML/CFT audit advice: Advising senior management and compliance teams on matters related to the statutory AML/CFT audits, including auditors' guidelines, requirements, AML/CFT audit process, and obligations related to the audit's outcome, tailored to both generic brokers’ anti-money laundering compliance obligations and your specific situation.
• AML/CFT remediation advice: We help brokers to effectively navigate situations involving an AML/CFT breach, warning, or investigation. The cost of non-compliance can result in significant regulatory fines and penalties, as well as irreparable reputational damage. Therefore, when you are on your supervisor's radar, it’s essential to have AML/CFT advisors who know how to set things right and effectively engage with AML/CFT supervisors and other stakeholders. For more details, please visit our Remediation Solutions page.
• Further information: You can visit our AML advisory page for an extensive list of AML/CFT advisory services we offer to support brokers' anti-money laundering compliance, as well as AML/CFT compliance for other types of financial institutions and businesses subject to the AML/CFT regime.

 

AML/CFT Training and Capacity Building

We offer the following set of AML/CFT training and education solutions tailored to brokers' AML/CFT compliance requirements:

• Customised AML/CFT Training Solutions: Specialised AML training sessions for various teams, including management, compliance, operations, sales, and customer relations, focusing on the brokers' AML requirements, AML/CFT awareness, best practices, and ML/TF red flags.
• Up-to-date Regulatory AML Updates: Keeping your compliance officers, managers, and teams updated with changes in the brokers' AML requirements, AML regulations and guidance.
• Workshops on Emerging Trends and Red Flags: Advising on new AML trends, red flags, and typologies relevant to brokers’ money laundering, terrorist financing, fraud, and other types of financial crime.
• Practical Workshops: Interactive workshops for effective and goal-oriented AML/CTF compliance, capacity planning, and resource allocation, covering:

• KYC procedures for brokers
• KYB analysis and ML/TF risk assessment application to specific clients, transactions and situations
• The brokers’ money laundering risks, common money laundering schemes and terrorist financing methods
• Improvements in clients' onboarding and transaction monitoring procedures
• Reg-tech for AML compliance
• Internal and external AML/CTF reporting
• Related risk and compliance issues, including financial crime prevention
• Application of the risk-based approach to brokers’ money laundering, fraud risks, and terrorism financing
• Suspicious matter reporting guidelines
• The implementation of customer identification programs and KYC procedures
• Strategic and operational ML/TF risk management
• AML/CTF specifics of the cross-border broking services
• Other obligations related to the AML requirements for brokers

• Practical Compliance Applications: Ensuring the practical application of training, focusing on real-world brokers’ money laundering, terrorist financing, and common brokers’ fraud scenarios, as well as specific challenges related to the brokers’ AML/CTF compliance that your business is likely to face.
• Further information: You can visit our AML training solutions page for an extensive list of AML/CFT training solutions we offer to brokers and other businesses subject to AML/CFT regulations.

 

Comprehensive AML/CFT Managed Solution for Brokers

Our brokers' AML/CFT compliance management solutions include, but are not limited to:

• AML/CFT Compliance Leadership: We act as your dedicated AML/CFT compliance officers (aka “Money Laundering Reporting Officers” or "MLROs") and as compliance managers, fully managing AML/CFT compliance and handling the brokers’ anti-money laundering obligations for your business.
• Brokers' Anti-Money Laundering Risk Management: Conducting detailed assessments to identify ML/TF risks, assess their inherent impact and likelihood of occurrence for your business, evaluate the effectiveness of mitigations and controls in place, and formulate residual risk ratings.
• Managing Client Onboarding Process and Customer Due Diligence: Implementing robust Know Your Customer (KYC), Know Your Business (KYB), customer due diligence (CDD), and enhanced due diligence (EDD) processes, for all types of clients, including higher ML/TF risk clients.
• PEP and Sanctions Screening: Managing thorough compliance with AML surveillance requirements by screening against global sanctions and politically exposed persons (PEPs) lists. This covers both initial and ongoing screening, as well as escalation processes for true positives.
• UBO Verification Streamlining: Verification of beneficial ownership in line with the AML requirements for brokers, identifying and assessing individuals who hold ultimate control over assets. This includes initial and ongoing checks, with procedures to address discrepancies and high-risk cases as they arise.
• AML Transaction Monitoring: Developing and implementing a set of business-specific ML/TF alerts and red flags to detect and report suspicious transactions, helping you comply with the AML requirements for brokers in a commercially efficient manner without making AML/CFT compliance a business hindering factor.
• Transaction Monitoring and Brokers’ Fraud Prevention Solution: Related to the above, we also help with the implementation of fraud alerts and red flags to detect, prevent, and respond to fraudulent transactions and activities.
• AML/CFT Tech Handling: Leading the alignment of AML/CFT technology implementation with your business processes and AML/CFT objectives. This also includes reviewing AML/CFT technology against the AML requirements for brokers and your core policies and procedures.
• AML/CTF and Data Sharing: Handling information requests from law enforcement agencies, AML/CTF supervisors, and other relevant AML/CTF-designated entities—such as your banking partners, FX platforms, liquidity providers, finance providers, etc.—to help you manage your AML/CTF compliance-related communications.
• Internal AML/CFT Reporting Solutions: Facilitating structured reporting workflows for your board and its delegate committees, with a specific focus on AML/CFT compliance. This includes:

• preparing and presenting comprehensive AML/CFT performance metrics
• providing insights into AML/CFT compliance effectiveness
• reporting on the effectiveness of internal controls and mitigations for your general AML/CFT obligations and the sector-specific brokers’ money laundering risks
• identifying areas for improvement

Our AML/CFT compliance reports cover:

• your ongoing compliance status in relation to AML requirements for brokers
• ongoing progress against your organisation-wide AML/CFT compliance calendar
• alignment of your business's AML/CFT performance with specific project goals and relevant KPIs
• other factors to ensure that the management function is well-informed and aligned with AML/CFT compliance requirements for brokers’ platforms.

• Brokers’ AML and Externally Reportable Matters: Implementing effective external reporting procedures to help you comply with brokers’ anti-money laundering requirements for reporting captured activities and transactions. This includes managing externally reportable matters covered by the following report types: Suspicious Activity Reports (SARs), Suspicious Matter Reports (SMRs), Suspicious Transaction Reports (STRs), Prescribed Transaction Reports (PTRs), Threshold Transaction Reports (TTRs), and their equivalents.
• Periodic AML/CFT Reporting: Organising and overseeing the preparation, data storage, and effective submission of required periodic reports to your AML/CTF supervisors, helping you comply with the statutory reporting AML requirements for brokers
• Brokers’ Fraud Prevention Management: Implementing targeted fraud prevention measures, enhancing internal controls, and helping you comply with internal policies and external regulations. We work to mitigate fraud risks without disrupting business processes, aligning fraud prevention efforts with your broader compliance objectives.

 

KYB Solutions for Brokers’ Anti-Money Laundering Compliance

We offer a range of KYB solutions to help you effectively comply with brokers' AML requirements. These include:

• Establishing ML/TF risk scoring models and parameters for different risk categories: We establish criteria to assess the ML/TF risk levels of your client base by identifying key risk factors based on their business nature, activities, jurisdictions, and other relevant characteristics and develop a risk scoring model to classify clients into different ML/TF risk categories such as low, medium, and high risk.
• Implementing a Customised KYB Process: We can help you roll out the KYB process across all departments to help your teams become sufficiently trained and equipped to handle clients' ML/TF risk effectively when it comes to verification, monitoring, ongoing due diligence, and other processes.
• KYB Technology and Automation: We select and evaluate technologies that can automate various parts of the KYB process, such as data collection, risk scoring, sanctions screening solutions, and ongoing monitoring.
• KYB-Related Escalation Process: We can develop and implement a clear escalation procedure for handling high-risk clients or irregularities, including the triggers for escalation, the actions required at each step, and the responsibilities for resolving these issues.

 

 

Core Policies and Procedures for Brokers’ AML/CFT Compliance

We develop, enhance, and implement a set of core policies, manuals, frameworks, and procedures for effective brokers' AML/CFT compliance management, including the following:

• Brokers' AML/CFT Framework Development: Covering specific AML requirements for brokers and obligations under national AML/CTF laws and regulations, any applicable AML/CFT guidance, your risk appetite, your existing human and technology resources, your business structure, your history of AML/CFT compliance, and your current and future business goals.
• AML/CTF Risk Assessments: Focused on the AML requirements for brokers for risk management as they relate to specific ML/TF risks faced by your business in terms of its size, products, client types, jurisdictions of operation, delivery channels, and the financial institutions it interacts with when delivering its services. Also covering the assessment of the effectiveness of existing controls and mitigations in place to determine the residual risk rating for both general ML/TF risks relevant to the most designated service providers/AML/CFT reporting entities and industry-specific ML/TF risks faced by brokers as these apply to your business operations. Visit our AML/CTF Risk Assessment page for more information.
• Comprehensive AML/CTF Programs (aka "AML/CFT Programme" in some jurisdictions): When it comes to brokers’ anti-money laundering compliance, your AML/CFT program is a core document that details how your business complies with various compulsory AML/CFT obligations, covering:
• the initial and ongoing CDD and EDD processes
• verification methods and requirements for identity, address, and source of funds
• internal and external reporting
• ongoing due diligence
• transaction monitoring
• employee vetting and training
• PEP and sanctions screening, and more

Our brokers’ AML solution is about grounding your AML/CTF program in reality and developing it based on your circumstances, including:

• your AML/CFT Risk Assessment
• your available ML/TF systems and controls
• your available resources
• your compliance budget
• your AML/CTF compliance team's experience and size
• your stakeholders' interests
• your available AML technology and other relevant factors
• Further Information: Visit our AML/CTF Programs page for more information

 

• Brokers' AML/CTF Procedures for Effective AML Compliance: Effective procedures are another core pillar of brokers’ AML/CTF compliance. This is why our solutions cover the development and enhancement of a detailed set of AML/CTF procedures and protocols to meet the distinct needs of your business, with a focus on effective AML risk management across various business processes and AML requirements for brokers as they apply to each step of your customer journey.
• AML Manuals and Guidelines: These are more detailed, practical resources that support the procedures by providing step-by-step instructions, specific reference points, and standards. Depending on your business size and complexity, we develop and enhance internal manuals and guidelines necessary for effective and efficient AML/CTF compliance. These include AML Operating Manuals, guiding materials, and guidelines that outline what to do for each process, step, or decision within your procedures.
• ML/TF Controls Mapping: Implementing controls based on your documented risks is another cornerstone of brokers' anti-money laundering compliance. We help you develop, map, and assess your internal ML/TF controls and improve their effectiveness to ensure compliance with brokers' AML requirements, address specific financial crime, money laundering, and terrorist financing trends, and respond to any findings from internal and external AML/CFT auditors and supervisors.
• AML Red Flag Identification and Response Protocols: This is another area where a well-written AML policy or program must face the reality of operational speed, the workload across different teams, available tools, client base size, and other factors. That is why another part of our brokers’ AML/CFT solution focuses on developing clear guidelines for identifying and responding to red flags indicative of fraud, money laundering, or terrorist financing activities, enabling you to take timely and appropriate action in different circumstances.
• AML/CTF Policy Update: Assisting with the review and enhancement of your core AML/CTF documents and operational procedures to reflect changes in your AML policies, including those caused by:
• updates in the AML/CTF laws, brokers’ AML regulations or AML supervisors’ sector guidance
• internal changes in your business structure, size, and resources
• the launch of new products or expansion to new jurisdictions
• changes in your risk appetite
• changes in related obligations, such as privacy laws, information sharing, brokers’ fraud prevention requirements, and more
• AML/CFT issues identified during internal or external reviews or audits
• other relevant factors

 

AML/CFT Technology Integration Support

Streamlining AML Compliance & CRM Management: Our brokers' AML solutions include needs assessment and assistance in selecting and integrating appropriate AML technologies for efficient brokers' anti-money laundering compliance management. This includes AML compliance technologies and tools that cover:

• Customer Due Diligence Automation
• E-KYC and Online Identity Verification
• Customer Onboarding Streamlining
• PEP and Sanctions Screening
• Ultimate Beneficial Owner (UBO) identification,
• KYB Solutions and AML/CFT Risk Management
• AML Alert Management
• Ongoing Due Diligence Obligations Management
• Internal AML/CFT reporting
• Brokers' AML/CFT Obligations for External Reporting
• AML/CFT Incident Management
• Exception Escalation and Management
• Brokers’ Fraud Prevention
• AML/CFT Management Automation: Including automated response workflows and AI technology
• Customisable AML/CFT measures specific to onboarding and monitoring of your high ML/TF risk clients
• Brokers' AML/CFT obligations for Record-Keeping
• Transaction Monitoring and Surveillance: Including transaction monitoring tools to automate detection and response to brokers’ money laundering and terrorist financing red flags
• Effective CRM for Handling AML Requirements for Brokers

 

Brokers’ AML/CFT Audit Solutions

Having over ten years of AML/CFT compliance experience, ranging from AML/CFT framework and controls development and testing to successful AML/CFT management and issues resolution for various reporting entities, gives us the necessary expertise and qualifications to be your AML/CFT auditors.

We offer two comprehensive AML/CFT audit options to review your compliance with brokers’ anti-money laundering obligations. These options are:

Statutory AML/CTF Audit Option: A comprehensive review of your existing AML/CTF framework to assess whether your business complies with AML/CTF standards and applicable obligations. We independently test your compliance with both local AML/CTF obligations and specific brokers' AML requirements. These often include but are not limited to:

• adherence to your AML/CTF risk assessment and operational AML/CFT procedures, including the existence of controls and mitigations to address money laundering and terrorist financing risks identified in your risk assessment
• compliance with your core AML/CFT documents, including sample testing
• Your CDD requirements
• Your staff vetting requirements
• Your AML/CFT management processes
• Your client onboarding and offboarding processes
• Your EDD requirements, including source of wealth (SOW) and source of funds (SOF) requirements and application of the risk-based approach to different ML/TF risk levels
• Your transaction monitoring process, covering large, complex, and unusual transactions and patterns
• Your ODD processes
• Your record-keeping process
• Your suspicious matter reporting process (also known as "suspicious activity" or "suspicious transaction" reporting in some jurisdictions)
• Your other reportable transactions process (typically covering cash and cross-border transactions)
• The way you detect and address material changes in client relationships
• Your initial and ongoing screening process
• And other obligations for brokers’ AML/CFT compliance

Assurance Levels: Our statutory AML/CFT audit options are available as both:

• A limited assurance audit
• A reasonable assurance audit

Further Information: Please visit our AML/CFT Audit page for more information.

Internal AML/CFT Audit Option: Apart from an independent statutory audit, we also offer an internal AML audit option to prepare brokers for an external audit by an independent auditor, an AML/CTF supervisor's review, or a review by another significant business stakeholder, such as a banking partner or an equity purchaser. This option is also suitable for significant business events like reorganisation or expansion.

Here, we go beyond merely meeting AML requirements for brokers and focus on evaluating the effectiveness of your AML/CFT controls and ML/TF risk management processes for alignment with:

• the ML/TF risks faced by your business, including your Know Your Business (KYB) analysis
• brokers’ anti-money laundering compliance obligations
• your current and future goals
• your business model
• your current and prospective client inflow
• the specific AML/CFT compliance areas or requirements (this process can be tailored to address particular AML issues or compliance areas, ensuring a targeted approach to brokers’ anti-money laundering compliance)

We help you not only identify any gaps and weaknesses but also provide insights on how to enhance your controls and respond to these in a commercially oriented manner for smarter AML/CFT compliance. Please visit our Internal AML/CTF Review Solution page for more information.

 

AML/CFT audit-related solutions:

• Post-Audit Remediation Support: We assist with the implementation of post-audit remediation actions, addressing and resolving any identified AML/CFT issues.
• AML/CFT Attestation Support: Our brokers’ AML solutions include helping you prepare the required attestations for your AML/CFT supervisor and other stakeholders. This involves confirming that all necessary remedial actions have been completed and that adequate AML/CFT compliance measures have been put in place.
• Post-Audit Stakeholders' Liaison: We manage your communications with national AML/CTF supervisors, banks, auditors, insurers, and other stakeholders, ensuring smooth progress in reporting on the status and completion of your post-audit action plan.

 

 

Brokers’ Fraud Prevention Solutions

The brokers' anti-money laundering control environment is closely related to prevention of financial crime in general, and fraud prevention in particular. Brokers' fraud prevention controls and ML/TF controls can form a unified compliance management framework tailored to the specific ML/TF and fraud risks your business is facing or is likely to face. Our Brokers’ Fraud Prevention Solutions include:

• Fraud Risk Assessment and Analysis: Conducting assessments to identify and prioritise fraud risks across your operations, allowing you to allocate resources effectively.
• Incident Response and Investigation: Creating response plans to manage fraud incidents, including guidelines for investigating, documenting, and applying corrective actions to minimise potential damage.
• Implementing Preventive Measures: Setting up checks, alerts, and controls to tackle fraud risks in the broking sector, as well as drafting a set of procedures and guidelines to address fraud scenarios that you are likely to face or have faced.
• Data Analytics for Fraud Detection: Leveraging data analytics to identify focus points for your fraud prevention efforts and areas for improvement.
• Fraud Detection Technology Implementation: Choosing and helping you implement appropriate technology for real-time fraud detection.
• Fraud Awareness Training: Educating staff about fraud risks, including identity theft and impersonation.
• Further information: Please visit our Fraud Management Solutions page for more information.

 

Brokers' fraud response requirements: In the current risk and compliance environment, implementing fraud prevention measures is either already mandated by law in some jurisdictions or, at minimum, expected by government agencies, financial market participants, and other stakeholders.

 

Broader Risk & Compliance Solutions for Brokers

Your AML/CFT compliance is generally more effective when the right hand knows what the left hand is doing, and at the very least, they do not interfere with each other. Incorporating your controls and procedures for compliance with the AML requirements for brokers into an overall risk and compliance management framework efficiently can increase your overall risk compliance effectiveness. This is where our experience can help you. Apart from AML/CFT compliance solutions for brokers, we include the following risk and compliance solutions:

• Compliance Advisory and Management: A comprehensive set of solutions for second-line compliance management, including both compliance advisory and compliance management options. Visit our Compliance Solutions page for Brokers for more information
• Third-line Compliance Assurance: A range of third-line compliance defence solutions covering compliance assurance program development and implementation, internal controls design, and controls testing solutions
• ISO Standards Compliance: A range of solutions for compliance with the International Organization for Standardization (ISO) standards, helping you prepare for ISO certification
• FATCA and CRS Compliance: A comprehensive set of solutions for complying with the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS) requirements, including tax residency verification, ongoing due diligence, reporting, and record-keeping
• Privacy Law Compliance: A range of solutions covering development, implementation, and testing of data privacy controls, procedures, and tools required to meet the applicable obligations under the Privacy Act, the GDPR, ISO 27701, etc
• Financial Licensing and Registration: A set of financial licensing solutions for brokers, including preparation, licensing process management, regulator liaison, and post-licensing support in:

• Offshore financial centres and tax havens
• Australia
• Singapore
• The United Kingdom
• The United States
• New Zealand
• The European Union

 

Common Money Laundering Risks for Brokers

Brokers' money laundering risk types can be broadly classified into five categories:

• Product types (services offered)
• Delivery methods
• Customer types
• The institutions involved in delivering your services
• Jurisdictions of operation

Given the variety of products offered by different businesses, as well as their different business structures and operations, the examples below of money laundering risks faced by brokers represent only a sample and are not exhaustive.

Product-Related Risks and Brokers’ AML Compliance

Some of the product-related ML/TF risks relevant to brokers' anti-money laundering compliance include:

Stock Brokers

• Weak Monitoring of Wash Trades: Lack of controls to detect and prevent the execution of buy and sell orders designed to create artificial trading activity, concealing the movement of illicit funds.
• Inadequate Detection of Manipulative Trading Patterns: Insufficient systems to identify trading strategies that distort market prices, enabling the layering of illicit funds.
• Insufficient Controls for Unusual Transaction Sizes: Weak mechanisms to flag and investigate trades significantly larger than typical client activity, exposing brokers to ML/TF risks.
• Lack of Oversight for High Transaction Frequencies: Absence of effective systems to identify trading volumes inconsistent with a client’s normal behaviour, facilitating the concealment of money laundering activities.

 

CFD and FX Brokers

• Weak Verification of Complex Transactions: Inadequate controls to trace and assess the legitimacy of intricate CFD and FX trades, creating opportunities to obscure the origin of funds.
• Insufficient Monitoring of Rapid Fund Movements: Lack of mechanisms to detect and review swift fund transfers across accounts or jurisdictions, which can aid in layering illicit funds.
• Inadequate Controls for Anonymity-Enhancing Instruments: Failure to prevent the misuse of tools or services that obscure client identities, increasing exposure to ML risks.
• Lack of Source of Funds Verification: Insufficient due diligence to verify the origins of funds used in CFD and FX transactions, enabling the processing of illicit proceeds.

 

Insurance Brokers

• Weak Controls Over Unusual Insurance Policy Purchases: Lack of mechanisms to flag policy purchases that deviate from a client’s financial profile, increasing exposure to money laundering.
• Inadequate Screening for Policies Exceeding Client Profiles: Weak due diligence to assess high-value insurance policies inconsistent with a client’s financial capacity, facilitating fund integration.
• Insufficient Monitoring of Policies for Non-Risk Mitigation Purposes: Absence of processes to identify insurance products used for investment or laundering purposes rather than traditional risk coverage.
• Failure to Monitor Policy Usage: Lack of tracking mechanisms to ensure that insurance policies are not misused for ML/TF activities.

 

Finance Brokers

• Weak Oversight of Loan Repayment Patterns: Insufficient monitoring of repayment schedules that deviate from agreed terms, potentially masking laundering activities.
• Inadequate Verification of Funding Sources: Failure to identify and verify the origins of funds used for loans, exposing brokers to ML risks.
• Approval of Loans Without Economic Justification: Lack of scrutiny for loans granted without clear business or economic rationale, increasing exposure to illicit fund misuse.
• Insufficient Controls Over Complex Loan Structures: Weak systems to identify and mitigate risks associated with intricate loan arrangements that obscure the movement of funds.

 

Mortgage Brokers

• Inadequate Scrutiny of Property Transactions: Weak controls to identify property deals inconsistent with a client’s financial profile, enabling money laundering.
• Insufficient Monitoring of Rapid Property Turnovers: Lack of systems to detect quick property sales and purchases, which may obscure illicit fund origins.
• Failure to Identify Opaque Corporate Structures in Property Purchases: Weak due diligence on corporate entities involved in property transactions, facilitating the concealment of beneficial ownership.
• Inadequate Verification of Property Valuations: Insufficient processes to verify property valuations, allowing the integration of illicit funds into real estate transactions.

 

Jurisdictional Risks and Brokers’ AML Compliance

Some of the jurisdictional risks relevant to brokers' money laundering prevention include:

• Lack of Monitoring for Ownership Transfers to High-Risk Jurisdictions: Brokers lacking mechanisms to monitor the transfer of financial instrument ownership to entities in jurisdictions with elevated ML/TF risks.
• Failure to Identify Ultimate Beneficial Owners (UBOs) in Complex Ownership Structures: Brokers failing to verify UBOs in complex ownership structures, particularly in transactions involving higher-risk or sanctioned jurisdictions.
• Insufficient Controls for Transactions Involving Sanctioned Jurisdictions: Insufficient AML controls for transactions involving clients or entities from sanctioned jurisdictions.
• Inadequate Verification of Source of Funds from High-Risk Jurisdictions: Brokers not implementing adequate processes to verify the source of funds from clients based in jurisdictions with elevated ML/TF risks.

 

Delivery Method Risks and Brokers’ AML Compliance

Some of the delivery method-related ML/TF risks relevant to brokers' anti-money laundering compliance include:

• Use of Non-Face-to-Face Channels Without Effective Verification: Brokers providing online onboarding or transaction channels without controls to ensure identity documents are linked to the individuals presenting them.
• Reliance on Third-Party Payment Processors Without Adequate Oversight: Utilising third-party payment processors without sufficient due diligence and ongoing monitoring.
• Facilitation of High-Frequency Transactions in Anonymised Systems: Brokers conducting high-frequency trading or transactions through systems that obscure user identities.
• Use of Digital or Cryptocurrency-Based Platforms Without Transaction Controls: Brokers handling digital or cryptocurrency transactions without controls to identify large, unusual, or complex transaction patterns, and without protocols for reviewing them.
• Use of Hawala Payment Methods Without Proper Controls: Brokers accepting Hawala or similar informal value transfer systems without verification and monitoring mechanisms.

 

Customer Type Risks and Brokers’ AML Compliance

Some of the customer-type-related ML/TF risks relevant to brokers' money laundering prevention include:

• Clients Using Offshore Entities to Conceal Ownership: Clients who establish offshore entities or shell companies to open brokerage accounts may aim to obscure the true beneficial owners, facilitating the movement of illicit funds.
• High-Volume Traders Without Corresponding Financial Profiles: Clients engaging in high-frequency trading activities that do not align with their reported financial status.
• Clients Requesting Multiple Accounts for Transaction Segregation: Clients who open multiple brokerage accounts to disperse transactions can be structuring activities to evade detection and reporting thresholds.
• Clients with Inconsistent Trading Patterns and Personal Information: Clients whose trading behaviours significantly deviate from their known financial backgrounds.
• Inability to Effectively Monitor a Large and Diverse Customer Base for Suspicious Activities: Without robust monitoring systems and well trained AML/CFT function, brokers may fail to detect unusual trading behaviours or transaction patterns indicative of money laundering.
• Difficulty in Assessing the Risk Profile of Clients Engaging in High-Risk Activities or from High-Risk Jurisdictions: Without comprehensive risk assessment tools, brokers may struggle to accurately determine the ML/TF risk levels of clients involved in high-risk sectors or originating from jurisdictions with elevated ML/TF threats.
• Challenges in Identifying Politically Exposed Persons (PEPs) or Individuals Under Sanctions: Without effective identification procedures, brokers may inadvertently facilitate higher AML risks associated with PEPs or sanctioned individuals.
• Risks Associated with Accepting Clients from Industries Known for Higher AML/CFT Risks Without Adequate Due Diligence: Without thorough due diligence processes, brokers engaging with clients from high-risk industries can be vulnerable to facilitating illicit financial activities.
• Clients Utilising Multiple Identities or Shell Companies Without Proper Verification: Without mechanisms to track and verify the use of multiple identities or shell companies, brokers may enable clients to obscure true ownership and facilitate money laundering.

 

Institutional Risks and Brokers’ AML Compliance

Some of the institutional risks relevant to brokers' anti-money laundering compliance include:

• Lack of Due Diligence on Banking Partners: Partnerships with correspondent banks, particularly those operating in jurisdictions with weaker AML/CFT standards, may create vulnerabilities. These gaps can lead to blind spots in transaction monitoring and an increased risk of exposure to illicit activities.
• ML/TF Risks from Delegates: Over-reliance on third-party AML/CFT providers without proper oversight or control over how the broker's AML/CTF program is implemented can create monitoring and reporting gaps, leaving brokers vulnerable to undetected ML/TF activities.
• Inconsistent or Unreliable AML/CFT Reporting: Brokers working with multiple partner institutions may face difficulties ensuring uniform AML/CFT practices and timely information sharing. This inconsistency can result in the misfunctioning of AML/CFT alerts and missed red flags.
  Insufficient Oversight of Clearinghouses and Payment Processors: Brokers relying on clearinghouses or payment processors without conducting adequate due diligence may be indirectly exposed to ML/TF risks. Weak AML controls in these institutions can create vulnerabilities in transaction processing and settlement.

 

 

Standard Anti-Money Laundering Requirements for Brokers

Given the number of AML requirements for brokers, the following list is not exhaustive:

• Conducting customer due diligence, including appropriate KYC checks: Ensuring verification of customers’ identities, as well as identities of beneficial owners of customers that are legal entities.
• Conducting transaction monitoring: Monitoring deposits, withdrawals, and other transactions to identify and report suspicious transactions and patterns.
• ODD requirements: Conducting ongoing customer due diligence, which is generally based on the customers' ML/TF risk profiles and ML/TF risk categories, as well as changes in their activities, behaviours, or risk factors.
• Staff Vetting: Performing comprehensive background checks and ongoing vetting of staff to maintain high standards of integrity and awareness.
• Reporting Certain Non-Suspicious Transactions: Obligation to report cross-border or cash transactions over a certain threshold, as per the local AML/CFT regulations, in a timely manner. However, if the transaction is processed through a local bank or another reporting entity, reporting requirements may depend on the local AML/CFT regulatory interpretation.
• Compliance with the regulatory obligations: Including registering with your local AML/CTF supervisor, appointing an AML/CTF officer or an MLRO, answering requests for information from the police, regulators and your AML/CTF supervisor, filing an annual report and more.
• Regular Staff Training: Providing continuous training to ensure employees are aware of AML/CFT protocols and can recognise red flags.
• Timely Reporting of Suspicious Transactions: Ensuring that suspicious transactions and activities are reported to the relevant authority (either your local AML/CFT supervisor or a financial intelligence unit (FIU)) within the required deadlines.
• ML/TF Risk Assessments: Conducting regular assessments of ML/TF risks faced by your business is a part of AML risk management for broking institutions and businesses.
• Independent AML/CFT Audits and Brokers: Organising periodic independent reviews of the AML/CFT program, other core documents, and components of your AML/CFT framework to assess their existence, compliance, application, and, where applicable, effectiveness, depending on local AML/CFT audit guidance.
• Applying EDD measures: Conducting enhanced due diligence on certain customers and certain transaction types.
• Establishing Clear AML/CFT Policies and Procedures: Creating documented guidelines for staff to follow.
• Monitoring PEPs and Sanctioned Entities: Implementing measures for additional scrutiny of politically exposed persons and entities on sanction lists.
• Screening Against Watchlists: Regular checks of clients against domestic and international watchlists.
• Ensuring Proper Record-Keeping: Maintaining detailed and accurate records of client information and transactions in compliance with AML/CFT regulations.

 

Common Brokers’ AML/CFT Issues

This is not an exhaustive list and could include:

During Customer Onboarding

• Inadequate Verification of Online Accounts: Failing to verify identities for online trading accounts increases the risk of onboarding fraudulent individuals using stolen or synthetic identities.
• Difficulty Screening PEPs in Trading Activities: Identifying politically exposed persons (PEPs) or sanctioned individuals becomes complex when clients use intermediaries or shell companies to access trading platforms.
• Insufficient EDD for High-Risk Trading Accounts: Not applying enhanced due diligence to clients involved in frequent, high-value trades with no clear economic purpose can facilitate illicit activities.
• Weak Risk Assessment of Corporate Trading Clients: Reliance on inadequate models may fail to uncover issues with beneficial ownership structures or the origins of funds for corporate clients.
• Failure to Assess the Nature of the Business Relationship: Not adequately assessing the intended purpose of the client's trading activities increases exposure to ML/TF risks.
• Insufficient Documentation or Outdated Information: Onboarding clients with incomplete or outdated documentation may result in non-compliance with KYC norms.

 

After Customer Onboarding

• Failure to Monitor Irregular Trading Patterns: Missing red flags like wash trading, layering, or spoofing may allow illicit fund movements to go undetected.
• Outdated Client Risk Profiles: Inadequate updates to client information, particularly for active traders or those with multi-jurisdictional accounts, can hinder risk detection.
• Limited Oversight of Cross-Border Trading: Without proper systems, detecting suspicious activity across jurisdictions or trading venues becomes challenging.
• Ineffective Integration Between AML Systems and Trading Platforms: Gaps in connecting trading data with compliance monitoring tools delay the identification of suspicious activities.
• Challenges in Detecting Behavioural Changes: Brokers lacking mechanisms to identify shifts in client behaviour or trading patterns may miss indicators of ML/TF activities.

 

 

Common Brokers’ Fraud Risks

The following list of Brokers’ fraud types is not exhaustive:

• Brokers’ Identity Fraud: Fraudsters use identity theft or impersonation to gain unauthorised access to brokerage accounts or trading platforms, potentially misusing client funds or securities.
• Brokers’ Transaction Fraud: Fraudulent activities involving manipulated trading instructions, unauthorised transactions, or falsified documentation to initiate trades or asset movements.
• Brokers’ Insider Fraud: Employees or individuals with privileged access misuse trading systems to execute unauthorised trades, manipulate client accounts, or misappropriate funds.
• Brokers’ Phishing Fraud: Cybercriminals target brokers’ clients through phishing schemes to steal login credentials, enabling access to sensitive trading accounts or financial information.
• Brokers’ Technology Fraud: Exploiting vulnerabilities in brokerage platforms, such as hacking systems, manipulating trading algorithms, or altering transaction logs to disguise or execute fraudulent trades.
• Brokers’ Securities Fraud: Involves pump-and-dump schemes, insider trading, or market manipulation, directly impacting brokers’ trading environments and client investments.
• Brokers’ Margin Fraud: Fraudulent activities involving misuse of margin accounts, such as inflating collateral values, providing false financial information, or executing high-risk trades without client consent.
• Brokers’ Cross-Border Fraud: Fraudulent transactions exploiting international trading systems, such as layering trades to obscure origins of funds, leveraging jurisdictional loopholes, or using false invoicing to create complex transaction trails.
• Brokers’ Digital Asset Fraud: Fraud involving cryptocurrencies or other digital assets, including unauthorised access to wallets, altering blockchain records, or promoting fraudulent token offerings.
• Brokers’ Ponzi Scheme Facilitation: Brokers that negligently or inadvertently enable fraudulent investment schemes by failing to conduct proper due diligence on trading platforms or financial products may expose clients to significant losses.

 

 

Common AML/CTF Red Flags for Brokers

The Financial Action Task Force (FATF) and various national AML/CTF supervisors outline the following ML/TF red flags for brokers, including broker-dealers. This is not an exhaustive list:

• Unusual Trading Activity (Stock/CFD Brokers and Broker-Dealers): Sudden spikes in trading volume or trades inconsistent with client profiles or market trends.
• Rapid Real Estate Transactions (Mortgage Brokers): Frequent buying and selling of properties that is unusual for the client's financial or behavioural profile.
• Complex Financing Structures (Finance Brokers): Use of unnecessarily complicated arrangements that obscure the source of funds.
• High-Risk Geographies (All Broker Types): Clients or transactions tied to high-risk jurisdictions or weak AML/CFT environments.
• Suspicious Wealth Indicators (Finance/Mortgage Brokers): Clients with wealth or income that doesn't match their transaction patterns or financial history.
• Market Manipulation Indicators (Stock/CFD Brokers and Broker-Dealers): Patterns suggesting pump-and-dump schemes, insider trading, or other market manipulation.
• Unusual Account Funding (Stock/CFD Brokers and Broker-Dealers): Sudden influx of funds from unknown or unrelated sources, particularly in high volumes.
• Cross-Border Trading Risks (Broker-Dealers): Transactions involving jurisdictions with weak AML controls or differing regulatory standards.
• Anomalous Real Estate Transactions (Mortgage Brokers): Transactions inconsistent with the client’s financial history or local market standards.
• Unexplained Wealth or Transactions (Finance Brokers): Large or unusual transactions that cannot be explained by the client's profile or background.
• Suspicious Trading Patterns (Stock/CFD Brokers and Broker-Dealers): Unusual trading activity that doesn't correlate with market trends or client history.
• Third-Party Payments (Broker-Dealers): Payments processed on behalf of unrelated third parties, obscuring the true nature of the transaction.
• Irregular Mortgage Funding (Mortgage Brokers): Sources of mortgage funding that are unclear or inconsistent with the client’s financial profile.
• Unusual Financial Structures (Finance Brokers): Financial arrangements that are overly complex without a clear rationale.
• Market Abuse Indicators (Stock/CFD Brokers and Broker-Dealers): Trades appearing to manipulate market prices or involve insider trading.
• Rapid Fund Movements (All Broker Types): Frequent and unexplained movement of funds in and out of accounts over short periods.
• Frequent Use of Multiple Accounts (All Broker Types): Clients opening and operating multiple accounts without a clear business rationale.
• Unusual Leveraged Trading Patterns (Forex/CFD Brokers): Highly leveraged trades lacking economic rationale or exhibiting erratic gains and losses.
• Irregular Account Changes (All Broker Types): Frequent updates to customer information without a clear reason, indicating attempts to evade detection.
• Single-Company Share Trading (Stock/CFD Brokers and Broker-Dealers): Accounts primarily trading shares of a single company, suggesting market manipulation or collusion.
• Frequent and Unexplained Account Closures (Online Trading Platforms/Introducing Brokers): Clients repeatedly opening and closing accounts without justification.