Navigating The Complexity of Ownership From The Lens of Sanction By Extension
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The KYB serves as the primary data source for verifying businesses and conducting corporate due diligence in over 250 countries and states.
Navigating the Complexity of ownership from the lens of Sanction by Extension
Mitigating Business verification complexity with The KYB in MENA Region
Onboard businesses with our swift KYB verification.
Expand globally without facing non-compliance challenges
Identify high-risk corporate clients while uncovering UBOs
Mitigate the risk of onboarding a shell company.
Partner with trusted companies and beneficial owners
Fortify your supply chain and ensure enhanced security
Mitigating Business Verification Complexity with The KYB in MENA Region
API Integration
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KYB stands for Know Your Business, which is a due diligence process that companies use to verify the identity and legitimacy of their business partners or customers.
16 October, 2023
Regulatory power is not always associated with government bodies, but sometimes it goes beyond that, and it’s where self-regulatory organizations, like the Financial Industry Regulatory Authority (FINRA), step in. The regulatory body oversees brokers and broker-dealer firms in the United States and helps protect US investors from scams and illegal trading practices.
The Financial Industry Regulatory Authority is a self-regulatory, Non-Governmental Organization (NGO) that creates and enforces rules governing the conduct and operations of brokers and broker-dealers in the US. FINRA oversees roughly 3,400 security firms, having almost 150,000 branch offices. It includes nearly 612,000 registered security professionals as of 2021. The regulatory authority has 19 offices in the US with a team of roughly 3,600 employees.
FINRA enjoys enforcement power over the brokers and companies it regulates. The regulatory body can impose sanctions and fines against those breaching its laws. Such sanctions may cause suspensions and sometimes bans from the industry.
FINRA’s key departments include:
FINRA’s regulatory operations are as under:
The Financial Industry Regulatory Authority’s enforcement powers allow it to take disciplinary actions against individuals or firms found to be violating industry rules. FINRA has the authority to refer specific cases to different government bodies for prosecution, like the Securities and Exchange Commission (SEC).
Firms found breaching FINRA AML rules can face hefty fines from the authorities. For instance, companies in the United States were fined $68 million in 2018, $65 million in 2017, and $176 million in 2016. These fines show how important FINRA compliance is and the severe effects of not fulfilling these obligations.
One example of the FINRA AML fine is Interactive Brokers LLC. This financial services company was charged $15 million in 2020 for several failures in its anti-money laundering program for five years. As a part of the settlement, the Financial Industry Regulatory Authority mandated the firm to engage an independent advisor to address the program’s shortcomings. The Commodity Futures Trading Commission (CFTC) and the SEC also imposed a total fine of $11.5 million, resulting in a total penalty of more than $38 million.
The Financial Industry Regulatory Authority has developed AML regulations to facilitate its members in detecting and preventing money laundering. These rules are designed to set minimum criteria for anti-money laundering compliance programs, including client identification and authentication, transaction monitoring, and reporting suspicious activities.
To become FINRA compliant, firms should deploy an AML program approved by the senior management or board of directors. The program should help the business identify and report any suspicious activity, and it must be customized to meet a company’s specific needs.
One of the important elements of an anti-money laundering compliance program is identifying and verifying customers. Businesses should gather accurate and complete data about their clients, including their name, date of birth, address, and other identifying information. Firms should also check the accuracy of collected data using trustworthy and independent sources.
Organizations should implement a Risk-Based Approach (RBA) to all AML processes by performing risk assessments on their clients. A customer’s risk should be evaluated by considering factors like the client’s occupation, location, and transaction history.
The Financial Industry Regulatory Authority mandates its members to provide training to AML compliance officers. This is to ensure that the team has the skills and knowledge necessary to identify and mitigate the risk of money laundering. AML compliance officers are responsible for analyzing client transactions and reporting suspicious activities to the relevant body.
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