Anti-Money Laundering (AML) Program:
Compliance and Supervisory Procedures
UPDATED AS OF December 7, 2022
1. Intuition Exchange Policy
It is the policy of the Intuition Exchange to prohibit and actively prevent money laundering and any activity that facilitates money laundering or the funding of terrorist or criminal activities by complying with all applicable requirements under the Bank Secrecy Act (BSA) and its implementing regulations.
Money laundering is generally defined as engaging in acts designed to conceal or disguise the true origins of criminally derived proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets. Generally, money laundering occurs in three stages. Cash first enters the financial system at the "placement" stage, where the cash generated from criminal activities is converted into monetary instruments, such as money orders or traveler's checks, or deposited into accounts at financial institutions. At the "layering" stage, the funds are transferred or moved into other accounts or other financial institutions to further separate the money from its criminal origin. At the "integration" stage, the funds are reintroduced into the economy and used to purchase legitimate assets or to fund other criminal activities or legitimate businesses.
Although cash is rarely deposited into securities accounts, the securities industry is unique in that it can be used to launder funds obtained elsewhere, and to generate illicit funds within the industry itself through fraudulent activities. Examples of types of fraudulent activities include insider trading, market manipulation, ponzi schemes, cybercrime and other investment-related fraudulent activity.
Terrorist financing may not involve the proceeds of criminal conduct, but rather an attempt to conceal either the origin of the funds or their intended use, which could be for criminal purposes. Legitimate sources of funds are a key difference between terrorist financiers and traditional criminal organizations. In addition to charitable donations, legitimate sources include foreign government sponsors, business ownership and personal employment. Although the motivation differs between traditional money launderers and terrorist financiers, the actual methods used to fund terrorist operations can be the same as or similar to methods used by other criminals to launder funds. Funding for terrorist attacks does not always require large sums of money and the associated transactions may not be complex.
Our AML policies, procedures and internal controls are designed to ensure compliance with all applicable BSA regulations and FINRA rules and will be reviewed and updated on a regular basis to ensure appropriate policies, procedures and internal controls are in place to account for both changes in regulations and changes in our business.
2. AML Compliance Person Designation and Duties
The Intuition Exchange has designated Joshua Samuel as its Anti-Money Laundering Program Compliance Person (AML Compliance Person), with full responsibility for the Intuition Exchange’s AML program. He has a working knowledge of the BSA and its implementing regulations and is qualified by experience, knowledge, and training. The duties of the AML Compliance Person will include monitoring the Intuition Exchange’s compliance with AML obligations, overseeing communication and training for employees. The AML Compliance Person will also ensure that the Intuition Exchange keeps and maintains all the required AML records and will ensure that Suspicious Activity Reports (SARs) are filed with the Financial Crimes Enforcement Network (FinCEN) when appropriate. The AML Compliance Person is vested with full responsibility and authority to enforce the Intuition Exchange’s AML program.
The Intuition Exchange will provide FINRA with contact information for the AML Compliance Person through the FINRA Contact System (FCS), including: (1) name; (2) title; (3) mailing address; (4) email address; (5) telephone number; and (6) facsimile (if any). The Intuition Exchange will promptly notify FINRA of any change in this information through FCS and will review, and if necessary, update, this information within 17 business days after the end of each calendar year. The annual review of FCS information will be conducted by AML Compliance Person and will be completed with all necessary updates being provided no later than 17 business days following the end of each calendar year. In addition, if there is any change to the information, AML Compliance Person will update the information promptly, but in any event not later than 30 days following the change.
3. Giving AML Information to Federal Law Enforcement Agencies and Other Financial Institutions
A. FinCEN Requests Under USA PATRIOT Act Section 314(a)
We will respond to a Financial Crimes Enforcement Network (FinCEN) request concerning accounts and transactions (a 314(a) Request) by immediately searching our records to determine whether we maintain or have maintained any account for, or have engaged in any transaction with, individual, entity or organization named in the 314(a) Request as outlined in the Frequently Asked Questions (FAQ) located on FinCEN’s secure website. We understand that we have 14 days (unless otherwise specified by FinCEN) from the transmission date of the request to respond to a 314(a) Request. We will designate through the FINRA Contact System (FCS) one or more persons to be the point of contact (POC) for 314(a) Requests and will promptly update the POC information following any change in such information. (See also Section 2 above regarding updating of contact information for the AML Compliance Person.) Unless otherwise stated in the 314(a) Request or specified by FinCEN, we are required to search those documents outlined in FinCEN’s FAQ. If we find a match, AML Compliance Person will report it to FinCEN via FinCEN’s Web-based 314(a) Secure Information Sharing System within 14 days or within the time requested by FinCEN in the request. If the search parameters differ from those mentioned above (for example, if FinCEN limits the search to a geographic location), AML Compliance Person will structure our search accordingly.
If AML Compliance Person searches our records and does not find a matching account or transaction, then he will not reply to the 314(a) Request. We will maintain documentation that we have performed the required search by [Example: printing a search self-verification document from FinCEN’s 314(a) Secure Information Sharing System confirming that Intuition Exchange has searched the 314(a) subject information against our records OR maintaining a log showing the date of the request, the number of accounts searched, the name of the individual conducting the search and a notation of whether or not a match was found.
We will not disclose the fact that FinCEN has requested or obtained information from us, except to the extent necessary to comply with the information request. AML Compliance Person will review, maintain, and implement procedures to protect the security and confidentiality of requests from FinCEN similar to those procedures established to satisfy the requirements of Section 501 of the Gramm-Leach-Bliley Act with regard to the protection of customers’ non-public information.
We will direct any questions we have about the 314(a) Request to the requesting federal law enforcement agency as designated in the request.
Unless otherwise stated in the 314(a) Request, we will not be required to treat the information request as continuing in nature, and we will not be required to treat the periodic 314(a) Requests as a government provided list of suspected terrorists for purposes of the customer identification and verification requirements.
B. National Security Letters
We understand that the receipt of a National Security Letter (NSL) is highly confidential. We understand that none of our officers, employees or agents may directly or indirectly disclose to any person that the FBI or other federal government authority has sought or obtained access to any of our records. To maintain the confidentiality of any NSL we receive, we will process and maintain the NSL internally. If we file a SAR after receiving an NSL, the SAR will not contain any reference to the receipt or existence of the NSL. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.
C. Grand Jury Subpoenas
We understand that the receipt of a grand jury subpoena concerning a customer does not in itself require that we file a Suspicious Activity Report (SAR). When we receive a grand jury subpoena, we will conduct a risk assessment of the customer subject to the subpoena as well as review the customer’s account activity. If we uncover suspicious activity during our risk assessment and review, we will elevate that customer’s risk assessment and file a SAR in accordance with the SAR filing requirements. We understand that none of our officers, employees or agents may directly or indirectly disclose to the person who is the subject of the subpoena its existence, its contents, or the information we used to respond to it. To maintain the confidentiality of any grand jury subpoena we receive, we will process and maintain the subpoena by internally. If we file a SAR after receiving a grand jury subpoena, the SAR will not contain any reference to the receipt or existence of the subpoena. The SAR will only contain detailed information about the facts and circumstances of the detected suspicious activity.
D. Voluntary Information Sharing With Other Financial Institutions Under USA PATRIOT Act Section 314(b)
We will share information with other financial institutions regarding individuals, entities, organizations and countries for purposes of identifying and, where appropriate, reporting activities that we suspect may involve possible terrorist activity or money laundering. AML Compliance Person will ensure that the Intuition Exchange files with FinCEN an initial notice before any sharing occurs and annual notices thereafter. We will use the notice form found at FinCEN’s website.
Before we share information with another financial institution, we will take reasonable steps to verify that the other financial institution has submitted the requisite notice to FinCEN, either by obtaining confirmation from the financial institution or by consulting a list of such financial institutions that FinCEN will make available. We understand that this requirement applies even to financial institutions with which we are affiliated
, and that we will obtain the requisite notices from affiliates and follow all required procedures.
We will employ strict procedures both to ensure that only relevant information is shared and to protect the security and confidentiality of this information, for example, by segregating it from the Intuition Exchange’s other books and records.
We also will employ procedures to ensure that any information received from another financial institution shall not be used for any purpose other than:
- identifying and, where appropriate, reporting on money laundering or terrorist activities;
- determining whether to establish or maintain an account, or to engage in a transaction; or
- assisting the financial institution in complying with performing such activities.
E. Joint Filing of SARs by Broker-Dealers and Other Financial Institutions
The obligation to identify and properly report a suspicious transaction and to timely file a SAR rests separately with each broker-dealer. However, one SAR may be filed for a suspicious activity by all broker-dealers involved in a transaction (so long as the report filed contains all relevant and required information) if the SAR is jointly filed. In addition, if a broker-dealer and another financial institution that is subject to the SAR regulations are involved in the same suspicious transaction, the financial institution may also file a SAR jointly (so long as the report filed contains all relevant and required information). For example, a broker-dealer and an insurance company may file one SAR with respect to suspicious activity involving the sale of variable insurance products. Disclosures that are made for the purposes of jointly filing a SAR are protected by the safe harbor contained in the SAR regulations. The financial institutions that jointly file a SAR shall each be separately responsible for maintaining a copy of the SAR and should maintain their own SAR supporting documentation in accordance with BSA recordkeeping requirements. See generallySection 12 (Suspicious Transaction and BSA Reporting) for information on a broker-dealer’s obligation to file a SAR to report suspicious transactions.
We will file joint SARs in the following circumstances, according to [describe procedures]. We will also share information about a particular suspicious transaction with any broker-dealer, as appropriate, involved in that particular transaction for purposes of determining whether we will file jointly a SAR.
F. Sharing SARs With Parent Companies Institutions
On January 20, 2006, FinCEN issued guidance permitting under certain conditions the sharing of SARswith either foreign or domestic parent entities.
[If parent company is a non-U.S. entity:] The confidentiality agreement will state that the recipient foreign parent entity (or entities) may not disclose further any SAR, or the fact that such report has been filed. The agreement will allow for the foreign parent entity (or entities) to disclose without permission underlying information (that is, information about the customers and transaction(s) reported) that forms the basis for the SAR and that does not explicitly reveal that a SAR was filed and that is not otherwise subject to disclosure restrictions.
4. Checking the Office of Foreign Assets Control Listings
Although not part of the BSA and its implementing regulations, the Office of Foreign Assets Control (OFAC) compliance is often performed in conjunction with AML compliance. OFAC is an office of the U.S. Treasury that administers and enforces economic sanctions and embargoes based on U.S. foreign policy and national security goals that target geographic regions and governments (e.g., Cuba, Sudan and Syria), as well as individuals or entities that could be anywhere (e.g., international narcotics traffickers, foreign terrorists and proliferators of weapons of mass destruction). As part of its enforcement efforts, OFAC publishes a list of Specially Designated Nationals and Blocked Persons (SDN list), which includes names of companies and individuals who are connected with the sanctions targets. U.S. persons are prohibited from dealing with SDNs wherever they are located, and all SDN assets must be blocked. Because OFAC's programs are constantly changing, describe how you will check with OFAC to ensure that your SDN list is current and also that you have complete information regarding the listings of economic sanctions and embargoes enforced by OFAC affecting countries and parties before opening an account and for existing accounts.
TEXT EXAMPLE: Before opening an account, and on an ongoing basis AML Compliance Person will check to ensure that a customer does not appear on the SDN list or is not engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC. (See
the OFAC website
for the SDN list and listings of current sanctions and embargoes). Because the SDN list and listings of economic sanctions and embargoes are updated frequently, we will consult them on a regular basis and subscribe to receive any available updates when they occur. With respect to the SDN list, we may also access that list through various software programs to ensure speed and accuracy. See alsoOFAC’s Sanctions List Search
tool, which screens names against the SDN list and other sanctions lists administered by OFAC. AML Compliance Person will also review existing accounts against the SDN list and listings of current sanctions and embargoes when they are updated and he will document the review.
If we determine that a customer is on the SDN list or is engaging in transactions that are prohibited by the economic sanctions and embargoes administered and enforced by OFAC, we will reject the transaction and/or block the customer's assets and file a blocked assets and/or rejected transaction form with OFAC within 10 days. We will also call the OFAC Hotline at (800) 540-6322 immediately.
Our review will include customer accounts, transactions involving customers (including activity that passes through the Intuition Exchange such as wires) and the review of customer transactions that involve physical security certificates or application-based investments (e.g., mutual funds).
5. Customer Identification Program
In addition to the information we must collect under FINRA Rules 2090 (Know Your
Customer) and 2111 (Suitability) and the 4510 Series (Books and Records
Requirements), and Securities Exchange Act of 1934 (Exchange Act) Rules 17a-3(a)(9)
(Beneficial Ownership regarding Cash and Margin Accounts), 17a-3(a)(17) (Customer Accounts) and Regulation Best Interest, we have established, documented and maintained a written Customer Identification Program (CIP). We will collect certain minimum customer identification information from each customer who opens an account; utilize risk-based measures to verify the identity of each customer who opens an account; record customer identification information and the verification methods and results; provide the required adequate CIP notice to customers that we will seek identification information to verify their identities; and compare customer identification information with government provided lists of suspected terrorists, once such lists have been issued by the government. See Section 5.g. (Notice to Customers) for additional information.
We do not open or maintain customer accounts within the meaning of 31 CFR 1023.100, in that we do not establish formal relationships with “customers” for the purpose of effecting transactions in securities. If in the future the Intuition Exchange elects to open customer accounts or to establish formal relationships with customers for the purpose of effecting transactions in securities, we will first establish, document and ensure the implementation of appropriate CIP procedures.
A. Required Customer Information
Prior to opening an account, User Onboarding department will collect the following information for all accounts, if applicable, for any person, entity or organization that is opening a new account and whose name is on the account:
- the name;
- date of birth (for an individual);
- an address, which will be a residential or business street address (for an individual), an Army Post Office (APO) or Fleet Post Office (FPO) box number, or residential or business street address of next of kin or another contact individual (for an individual who does not have a residential or business street address), or a principal place of business, local office, or other physical location
(for a person other than an individual); and
- an identification number, which will be a taxpayer identification number (for U.S.
persons), or one or more of the following: a taxpayer identification number, passport number and country of issuance, alien identification card number, or number and country of issuance of any other government-issued document evidencing nationality or residence and bearing a photograph or other similar safeguard (for non-U.S. persons).
In the event that a customer has applied for, but has not received, a taxpayer identification number, we will contact the applicant to confirm that the application was filed before the customer opens the account and to obtain the taxpayer identification number within a reasonable period of time after the account is opened.
When opening an account for a foreign business or enterprise that does not have an identification number, we will request alternative government-issued documentation certifying the existence of the business or enterprise.
B. Customers Who Refuse to Provide Information
If a potential or existing customer either refuses to provide the information described above when requested, or appears to have intentionally provided misleading information, Intuition Exchange will not open a new account and, after considering the risks involved, consider closing any existing account. In either case, our AML Compliance Person will be notified so that we can determine whether we should report the situation to FinCEN on a SAR.
C. Verifying Information
Based on the risk, and to the extent reasonable and practicable, we will ensure that we have a reasonable belief that we know the true identity of our customers by using risk-based procedures to verify and document the accuracy of the information we get about our customers. AML Compliance Person will analyse the information we obtain to determine whether the information is sufficient to form a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).
We will verify customer identity through ‘Secure SDK’, a third-party KYC verification service provider. We will use documents to verify customer identity when appropriate documents are available. In light of the increased instances of identity fraud, we will supplement the use of documentary evidence by using the non-documentary means described below whenever necessary. We may also use nondocumentary means, if we are still uncertain about whether we know the true identity of the customer. In verifying the information, we will consider whether the identifying information that we receive, such as the customer’s name, street address, zip code, telephone number (if provided), date of birth and Social Security number, allow us to determine that we have a reasonable belief that we know the true identity of the customer (e.g., whether the information is logical or contains inconsistencies).
Appropriate documents for verifying the identity of customers include the following:
- For an individual, an unexpired government-issued identification evidencing nationality or residence and bearing a photograph or similar safeguard, such as a driver’s license or passport; and
- For a person other than an individual, documents showing the existence of the entity, such as certified articles of incorporation, a government-issued business license, a partnership agreement or a trust instrument.
We understand that we are not required to take steps to determine whether the document that the customer has provided to us for identity verification has been validly issued and that we may rely on a government-issued identification as verification of a customer’s identity. If, however, we note that the document shows some obvious form of fraud, we must consider that factor in determining whether we can form a reasonable belief that we know the customer’s true identity.
We will use the following non-documentary methods of verifying identity:
- Independently verifying the customer’s identity through the comparison of information provided by the customer with information obtained from a consumer reporting agency, public database or other source [identify reporting agency, database, etc.];
- Checking references with other financial institutions; or
- Obtaining a financial statement.
We will use non-documentary methods of verification when:
- the customer is unable to present an unexpired government-issued identification document with a photograph or other similar safeguard;
- the Intuition Exchange is unfamiliar with the documents the customer presents for identification verification;
- the customer and Intuition Exchange do not have face-to-face contact; and
- there are other circumstances that increase the risk that the Intuition Exchange will be unable to verify the true identity of the customer through documentary means.
We will verify the information within a reasonable time before or after the account is opened. Depending on the nature of the account and requested transactions, we may refuse to complete a transaction before we have verified the information, or in some instances when we need more time, we may, pending verification, restrict the types of transactions or dollar amount of transactions. If we find suspicious information that indicates possible money laundering, terrorist financing activity, or other suspicious activity, we will, after internal consultation with the Intuition Exchange's AML Compliance Person, file a SAR in accordance with applicable laws and regulations.
We recognize that the risk that we may not know the customer’s true identity may be heightened for certain types of accounts, such as an account opened in the name of a corporation, partnership or trust that is created or conducts substantial business in a jurisdiction that has been designated by the U.S. as a primary money laundering jurisdiction, a terrorist concern, or has been designated as a non-cooperative country or territory. We will identify customers that pose a heightened risk of not being properly identified. We will also take the following additional measures that may be used to obtain information about the identity of the individuals associated with the customer when standard documentary methods prove to be insufficient.
D. Lack of Verification
When we cannot form a reasonable belief that we know the true identity of a customer, we will do the following: (1) not open an account; (2) impose terms under which a customer may conduct transactions while we attempt to verify the customer’s identity; (3) close an account after attempts to verify a customer’s identity fail; and (4) determine whether it is necessary to file a SAR in accordance with applicable laws and regulations.
We will document our verification, including all identifying information provided by a customer, the methods used and results of verification, and the resolution of any discrepancies identified in the verification process. We will keep records containing a description of any document that we relied on to verify a customer’s identity, noting the type of document, any identification number contained in the document, the place of issuance, and if any, the date of issuance and expiration date. With respect to non-documentary verification, we will retain documents that describe the methods and the results of any measures we took to verify the identity of a customer. We will also keep records containing a description of the resolution of each substantive discrepancy discovered when verifying the identifying information obtained. We will retain records of all identification information for five years after the account has been closed; we will retain records made about verification of the customer's identity for five years after the record is made.
F. Comparison with Government-Provided Lists of Terrorists
At such time as we receive notice that a federal government agency has issued a list of known or suspected terrorists and identified the list as a list for CIP purposes, we will, within a reasonable period of time after an account is opened (or earlier, if required by another federal law or regulation or federal directive issued in connection with an applicable list), determine whether a customer appears on any such list of known or suspected terrorists or terrorist organizations issued by any federal government agency and designated as such by Treasury in consultation with the federal functional regulators. We will follow all federal directives issued in connection with such lists.
We will continue to comply separately with OFAC rules prohibiting transactions with certain foreign countries or their nationals.
G. Notice to Customers
We will provide notice to customers that the Intuition Exchange is requesting information from them to verify their identities, as required by federal law. We will use direct emails to notify such customers.Important Information About Procedures for Opening a New Account
To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person who opens an account.
What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.
H. Reliance on Another Financial Institution for Identity Verification
We may, under the following circumstances, rely on the performance by another financial institution (including an affiliate) of some or all of the elements of our CIP with respect to any customer that is opening an account or has established an account or similar business relationship with the other financial institution to provide or engage in services, dealings or other financial transactions:
- when such reliance is reasonable under the circumstances;
- when the other financial institution is subject to a rule implementing the anti-money laundering compliance program requirements of 31 U.S.C. 5318(h), and is regulated by a federal functional regulator; and
- when the other financial institution has entered into a contract with our Intuition Exchange requiring it to certify annually to us that it has implemented its antimoney laundering program and that it will perform (or its agent will perform) specified requirements of the customer identification program.
6. Customer Due Diligence Rule
We do not open or maintain accounts for legal entity customers within the meaning of 31 CFR 1010.230. If in the future the Intuition Exchange elects to open accounts for legal entity customers, we will first establish, document and ensure the implementation of appropriate CDD procedures.
A. Understanding the Nature and Purpose of Customer Relationships
Depending on the facts and circumstances, a customer risk profile may include such information as:
- The type of customer;
- The account or service being offered;
- The customer’s income;
- The customer’s net worth;
- The customer’s domicile;
- The customer’s principal occupation or business; and
- In the case of existing customers, the customer’s history of activity.
B. Conducting Ongoing Monitoring to Identify and Report Suspicious Transactions
We will conduct ongoing monitoring to identify and report suspicious transactions and, on a risk basis, maintain and update customer information, including information regarding the beneficial ownership of legal entity customers, using the customer risk profile as a baseline against which customer activity is assessed for suspicious transaction reporting. Our suspicious activity monitoring procedures are detailed within Section 11 (Monitoring Accounts for Suspicious Activity).
- Monitoring Accounts for Suspicious Activity
11. Monitoring Accounts for Suspicious Activity
We will monitor account activity for unusual size, volume, pattern or type of transactions, taking into account risk factors and red flags that are appropriate to our business. (Red flags are identified in Section 11.b. below.) The customer risk profile will serve as a baseline for assessing potentially suspicious activity. The AML Compliance Person or his or her designee will be responsible for this monitoring, will review any activity that our monitoring system detects, will determine whether any additional steps are required, will document when and how this monitoring is carried out, and will report suspicious activities to the appropriate authorities.
We will conduct periodic reviews of user activity and document our monitoring and reviews as well. The AML Compliance Person or his or her designee will conduct an appropriate investigation and review relevant information from internal or third-party sources before a SAR is filed. Relevant information can include, but not be limited to, the following:
- The type of customer;
- The account or service being offered;
- The customer’s income;
- The customer’s net worth;
- The customer’s domicile;
- The customer’s principal occupation or business; and
- In the case of existing customers, the customer’s history of activity.
A. Emergency Notification to Law Enforcement by Telephone
In situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes, we will immediately call an appropriate law enforcement authority. If a customer or company appears on OFAC’s SDN list, we will call the OFAC Hotline at (800) 540-6322. Other contact numbers we will use are: FinCEN’s Financial Institutions Hotline ((866) 556-3974) (especially to report transactions relating to terrorist activity), local U.S. Attorney’s office
(insert contact number), local FBI office (insert contact number) and local SEC office
(insert contact number) (to voluntarily report such violations to the SEC in addition to contacting the appropriate law enforcement authority). If we notify the appropriate law enforcement authority of any such activity, we must still file a timely a SAR.
Although we are not required to, in cases where we have filed a SAR that may require immediate attention by the SEC, we may contact the SEC via the SEC SAR Alert Message Line at (202) 551-SARS (7277) to alert the SEC about the filing. We understand that calling the SEC SAR Alert Message Line does not alleviate our obligations to file a SAR or notify an appropriate law enforcement authority.
B. Red Flags
Red flags that signal possible money laundering or terrorist financing include, but are not limited to:Potential Red Flags in Customer Due Diligence and Interactions with Customers
Other Potential Red Flags
- The customer provides “US” with unusual or suspicious identification documents that cannot be readily verified or are inconsistent with other statements or documents that the customer has provided. Or, the customer provides information that is inconsistent with other available information about the customer. This indicator may apply to account openings and to interaction subsequent to account opening.
- The customer is reluctant or refuses to provide ‘US’ with complete customer due diligence information as required by the procedures, which may include information regarding the nature and purpose of the customer’s business, prior financial relationships, anticipated account activity, business location and, if applicable, the entity’s officers and directors.
- The customer refuses to identify a legitimate source of funds or information is false, misleading or substantially incorrect.
- The customer is domiciled in, doing business in or regularly transacting with counterparties in a jurisdiction that is known as a bank secrecy haven, tax shelter, high-risk geographic location (g., known as a narcotics producing jurisdiction, known to have ineffective AML/Combating the Financing of Terrorism systems) or conflict zone, including those with an established threat of terrorism.
- The customer has difficulty describing the nature of his or her business or lacks general knowledge of his or her industry.
- The customer has no discernible reason for using the Intuition Exchange’s service.
- The customer’s legal or mailing address is associated with multiple other accounts that do not appear related.
- The customer appears to be acting as an agent for an undisclosed principal, but is reluctant to provide information.
- The customer is reluctant to provide information needed to file reports to proceed with the transaction.
- The customer exhibits unusual concern with the Intuition Exchange’s compliance with government reporting requirements and the Intuition Exchange’s AML policies.
- The customer tries to persuade an employee not to file required reports or not to maintain the required records.
- Notifications received from the broker-dealer’s clearing Intuition Exchange that the clearing Intuition Exchange had identified potentially suspicious activity in customer accounts. Such notifications can take the form of alerts or other concern regarding negative news, money movements or activity involving certain securities.
- Law enforcement has issued subpoenas or freeze letters regarding a customer or account at the securities Intuition Exchange.
- The customer makes high-value transactions not commensurate with the customer’s known income or financial resources.
- The customer wishes to engage in transactions that lack business sense or an apparent investment strategy, or are inconsistent with the customer’s stated business strategy. The stated business, occupation or financial resources of the customer are not commensurate with the type or level of activity of the customer.
- The customer engages in transactions that show the customer is acting on behalf of third parties with no apparent business or lawful purpose.
The customer engages in transactions that show a sudden change inconsistent with normal activities of the customer.
- Securities transactions are unwound before maturity, absent volatile market conditions or other logical or apparent reason.
- The customer does not exhibit a concern with the cost of the transaction or fees (g., surrender fees, or higher than necessary commissions).
- A borrower defaults on a cash-secured loan or any loan that is secured by assets that are readily convertible into currency.
- There is an unusual use of trust funds in business transactions or other financial activity.
C. Responding to Red Flags and Suspicious Activity
When our employee detects any red flag, or other activity that may be suspicious, he or she will notify our compliance team and appropriate actions will be taken. Under the direction of the AML Compliance Person, the Intuition Exchange will determine whether or not and how to further investigate the matter. This may include gathering additional information internally or from third-party sources, contacting the government, freezing the account and/or filing a SAR.
12. Suspicious Transactions and BSA Reporting
A. Filing a SAR
We will file SARs with FinCEN for any transactions (including deposits and transfers) conducted or attempted by, at or through our Intuition Exchange involving $5,000 or more of funds or assets (either individually or in the aggregate) where we know, suspect or have reason to suspect:
- the transaction involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity as part of a plan to violate or evade federal law or regulation or to avoid any transaction reporting requirement under federal law or regulation;
- the transaction is designed, whether through structuring or otherwise, to evade any requirements of the BSA regulations;
- the transaction has no business or apparent lawful purpose or is not the sort in which the customer would normally be expected to engage, and after examining the background, possible purpose of the transaction and other facts, we know of no reasonable explanation for the transaction; or
- the transaction involves the use of the Intuition Exchange to facilitate criminal activity.
We will also file a SAR and notify the appropriate law enforcement authority in situations involving violations that require immediate attention, such as terrorist financing or ongoing money laundering schemes. In addition, although we are not required to, we may contact that SEC in cases where a SAR we have filed may require immediate attention by the SEC. See Section 11 for contact numbers. We also understand that, even if we notify a regulator of a violation, unless it is specifically covered by one of the exceptions in the SAR rule, we must file a SAR reporting the violation.
We may file a voluntary SAR for any suspicious transaction that we believe is relevant to the possible violation of any law or regulation but that is not required to be reported by us under the SAR rule. It is our policy that all SARs will be reported regularly to the Board of Directors and appropriate senior management, with a clear reminder of the need to maintain the confidentiality of the SAR.
We will report suspicious transactions by completing a SAR, and we will collect and maintain supporting documentation as required by the BSA regulations. We will file a SAR-SF no later than 30 calendar days after the date of the initial detection of the facts that constitute a basis for filing a SAR. If no suspect is identified on the date of initial detection, we may delay filing the SAR for an additional 30 calendar days pending identification of a suspect, but in no case will the reporting be delayed more than 60 calendar days after the date of initial detection. The phrase “initial detection” does not mean the moment a transaction is highlighted for review. The 30-day (or 60-day) period begins when an appropriate review is conducted and a determination is made that the transaction under review is “suspicious” within the meaning of the SAR requirements. A review must be initiated promptly upon identification of unusual activity that warrants investigation.
We will retain copies of any SAR filed and the original or business record equivalent of any supporting documentation for five years from the date of filing the SAR-SF. We will identify and maintain supporting documentation and make such information available to FinCEN, any other appropriate law enforcement agencies, federal or state securities regulators or SROs upon request.
B. Currency Transaction Reports
We will file with FinCEN CTRs for currency transactions that exceed $10,000. Also, we will treat multiple transactions involving currency as a single transaction for purposes of determining whether to file a CTR if they total more than $10,000 and are made by or on behalf of the same person during any one business day. We will use the BSA E-Filing System
to file the supported CTR Form.
C. Currency and Monetary Instrument Transportation Reports
Our Intuition Exchange prohibits both the receipt of currency or other monetary instruments that have been transported, mailed or shipped to us from outside of the United States, and the physical transportation, mailing or shipment of currency or other monetary instruments by any means other than through the postal service or by common carrier. We will file a CMIR with the Commissioner of Customs if we discover that we have received or caused or attempted to receive from outside of the U.S. currency or other monetary instruments in an aggregate amount exceeding $10,000 at one time (on one calendar day or, if for the purposes of evading reporting requirements, on one or more days). We will also file a CMIR if we discover that we have physically transported, mailed or shipped or caused or attempted to physically transport, mail or ship by any means other than through the postal service or by common carrier currency or other monetary instruments of more than $10,000 at one time (on one calendar day or, if for the purpose of evading the reporting requirements, on one or more days). We will use the CMIR Form
provided on FinCEN’s website.
E. Monetary Instrument Purchases
We do not issue bank checks or drafts, cashier’s checks, money orders or traveler’s checks in the amount of $3,000 or more.
F. Funds Transmittals of $3,000 or More Under the Travel Rule
When we are the transmittor’s financial institution in funds of $3,000 or more, we will retain either the original or a copy (e.g., microfilm, electronic record) of the transmittal order. We will also record on the transmittal order the following information: (1) the name and address of the transmittor; (2) if the payment is ordered from an account, the account number; (3) the amount of the transmittal order; (4) the execution date of the transmittal order; and (5) the identity of the recipient’s financial institution. In addition, we will include on the transmittal order as many of the following items of information as are received with the transmittal order: (1) the name and address of the recipient; (2) the account number of the recipient; (3) any other specific identifier of the recipient; and (4) any form relating to the transmittal of funds that is completed or signed by the person placing the transmittal order.
We will also verify the identity of the person placing the transmittal order (if we are the transmitting Intuition Exchange), provided the transmittal order is placed in person and the transmittor is not an established customer of the Intuition Exchange (i.e., a customer of the Intuition Exchange who has not previously maintained an account with us or for whom we have not obtained and maintained a file with the customer's name, address, taxpayer identification number, or, if none, alien identification number or passport number and country of issuance). If a transmittor or recipient is conducting business in person, we will obtain: (1) the person’s name and address; (2) the type of identification reviewed and the number of the identification document (e.g., driver’s license); and (3) the person’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record the lack thereof. If a transmittor or recipient is not conducting business in person, we shall obtain the person’s name, address, and a copy or record of the method of payment (e.g., check or credit card transaction). In the case of transmittors only, we shall also obtain the transmittor’s taxpayer identification number (e.g., Social Security or employer identification number) or, if none, alien identification number or passport number and country of issuance, or a notation in the record of the lack thereof. In the case of recipients only, we shall obtain the name and address of the person to which the transmittal was sent.
13. AML Recordkeeping
A. Responsibility for Required AML Records and SAR Filing
Our AML Compliance Person and his or her designee will be responsible for ensuring that AML records are maintained properly and that SARs are filed as required.
In addition, as part of our AML program, our Intuition Exchange will create and maintain SARs, CTRs, CMIRs, FBARs, and relevant documentation on customer identity and verification (See Section 5 above) and funds transmittals. We will maintain SARs and their accompanying documentation for at least five years. We will keep other documents according to existing BSA and other recordkeeping requirements, including certain SEC rules that require sixyear retention periods (e.g., Exchange Act Rule 17a-4(a) requiring Intuition Exchanges to preserve for a period of not less than six years, all records required to be retained by Exchange Act Rule 17a-3(a)(1)-(3), (a)(5), and (a)(21)-(22) and Exchange Act Rule 17a-4(e)(5) requiring Intuition Exchanges to retain for six years account record information required pursuant to Exchange Act Rule 17a-3(a)(17)).
B. SAR Maintenance and Confidentiality
We will hold SARs and any supporting documentation confidential. We will not inform anyone outside of FinCEN, the SEC, an SRO registered with the SEC or other appropriate law enforcement or regulatory agency about a SAR. We will refuse any subpoena requests for SARs or for information that would disclose that a SAR has been prepared or filed and immediately notify FinCEN of any such subpoena requests that we receive. See Section 11 for contact numbers. We will segregate SAR filings and copies of supporting documentation from other Intuition Exchange books and records to avoid disclosing SAR filings. Our AML Compliance Person will handle all subpoenas or other requests for SARs. We may share information with another financial institution about suspicious transactions in order to determine whether we will jointly file a SAR according to the provisions of Section 3.d. In cases in which we file a joint SAR for a transaction that has been handled both by us and another financial institution, both financial institutions will maintain a copy of the filed SAR.
C. Additional Records
We shall retain either the original or a microfilm or other copy or reproduction of each of the following:
- A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property. The record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof and the date thereof;
- A record of each advice, request or instruction received or given regarding any transaction resulting (or intended to result and later canceled if such a record is normally made) in the transfer of currency or other monetary instruments, funds, checks, investment securities or credit, of more than $10,000 to or from any person, account or place outside the U.S.;
- A record of each advice, request or instruction given to another financial institution (which includes broker-dealers) or other person located within or without the U.S., regarding a transaction intended to result in the transfer of funds, or of currency, other monetary instruments, checks, investment securities or credit, of more than $10,000 to a person, account or place outside the U.S.;
- Each document granting signature or trading authority over each customer's account;
- Each record described in Exchange Act Rule 17a-3(a): (1) (blotters), (2) (ledgers for assets and liabilities, income, and expense and capital accounts), (3) (ledgers for cash and margin accounts), (4) (securities log), (5) (ledgers for securities in transfer, dividends and interest received, and securities borrowed and loaned), (6) (order tickets), (7) (purchase and sale tickets), (8) (conIntuition Exchanges), and (9) (identity of owners of cash and margin accounts);
- A record of each remittance or transfer of funds, or of currency, checks, other monetary instruments, investment securities or credit, of more than $10,000 to a person, account or place, outside the U.S.; and
- A record of each receipt of currency, other monetary instruments, checks or investment securities and of each transfer of funds or credit, of more than $10,000 received on any one occasion directly and not through a domestic financial institution, from any person, account or place outside the U.S.
14. Clearing/Introducing Firm Relationships
We will work closely with our clearing firm to detect money laundering. We will exchange information, records, data and exception reports as necessary to comply [with our contractual obligations and] with AML laws. Both Intuition Exchange and our clearing firm have filed (and kept updated) the necessary annual certifications for such information sharing, which can be found on FinCEN’s website.
As a general matter, we will obtain and use the following exception reports offered by our clearing Intuition Exchange in order to monitor customer activity and we will provide our clearing Intuition Exchange with proper customer identification and due diligence information as required to successfully monitor customer transactions. We have discussed how each Intuition Exchange will apportion customer and transaction functions and how we will share information and set forth our understanding in a written document. We understand that the apportionment of functions will not relieve either of us from our independent obligation to comply with AML laws, except as specifically allowed under the BSA and its implementing regulations.
15. Training Programs
We will develop ongoing employee training under the leadership of the AML Compliance Person and senior management. Our training will occur on at least an annual basis. It will be based on our Intuition Exchange’s size, its customer base, and its resources and be updated as necessary to reflect any new developments in the law.
Our training will include, at a minimum: (1) how to identify red flags and signs of money laundering that arise during the course of the employees’ duties; (2) what to do once the risk is identified (including how, when and to whom to escalate unusual customer activity or other red flags for analysis and, where appropriate, the filing of SARs); (3) what employees' roles are in the Intuition Exchange's compliance efforts and how to perform them; (4) Our record retention policy; and (5) the disciplinary consequences (including civil and criminal penalties) for non-compliance with the BSA.
We will develop training in our Intuition Exchange, or contract for it. Delivery of the training may include educational pamphlets, videos, intranet systems, in-person lectures and explanatory memos. We will maintain records to show the persons trained, the dates of training and the subject matter of their training.
We will review our operations to see if certain employees, such as those in compliance, margin and corporate security, require specialized additional training. Our written procedures will be updated to reflect any such changes.
16. Program to Independently Test AML Program
The testing of our AML program will be performed at least annually by an independent third party. We will evaluate the qualifications of the independent third party to ensure they have a working knowledge of applicable requirements under the BSA and its implementing regulations. Independent testing will be performed more frequently if circumstances warrant.
B. Evaluation and Reporting
After we have completed the independent testing, staff will report its findings to senior management.We will promptly address each of the resulting recommendations and keep a record of how each noted deficiency was resolved.
17. Monitoring Employee Conduct and Accounts
We will subject employee accounts to the same AML procedures as customer accounts, under the supervision of the AML Compliance Person. We will also review the AML performance of supervisors, as part of their annual performance review. The AML Compliance Person’s accounts will be reviewed by senior management directly.
18. Confidential Reporting of AML Non-Compliance
Employees will promptly report any potential violations of the Intuition Exchange’s AML compliance program to the AML Compliance Person, unless the violations implicate the AML Compliance Person, in which case the employee shall report to the president of the audit committee chair. Such reports will be confidential, and the employee will suffer no retaliation for making them.
19. Senior Manager Approval
Senior management has approved this AML compliance program in writing as reasonably designed to achieve and monitor our Intuition Exchange’s ongoing compliance with the requirements of the BSA and the implementing regulations under it. This approval is indicated by signatures below.