Ch 4 Deck 5 Flashcards
Under regulation FD information when material nonpublic information is intentionally or unintentionally released to some trading on it is only legal
after the required public disclosure is made
Firms are required to establish and maintain reasonable procedures to prevent insider trading Most firms do this by
constructing a Chinese wall (information barrier)
The purpose of a Chinese wall is to prevent the flow of material nonpublic information
from sensitive areas like IB to other parts of the firm
Chinese walls often include physical separation between
investment banking areas and trading areas.
to prevent insider trading, Sometimes when information is needed from an employee it is necessary to
bring the employee “over the wall”
to prevent insider trading, Investment Banking and Research areas must maintain on certain securities current
restricted and watch lists.
to prevent insider trading, Investment Banking and Research areas must make sure that restricted and watch lists are
disseminated to employees
list of securities that the firm and employees are currently restricted from trading in.
Restricted List
list of securities that is under scrutiny from the firm’s compliance program.
Watch List
To prevent insider trading, The firm’s policy must explain how and why a security is
placed on a list (watch or restricted) and when it can be removed
To prevent insider trading, both watch and restricted lists should be
documented and records should be kept
Three stages of money laundering are
- Placement
- Layering
- Integration
the stage of money laundering when money moves into the financial system
- Placement
the stage of money laundering when transactions take place in order to confuse the origin of the assets
- Layering
the stage of money laundering when the assets are invested in authentic investments.
- Integration
Law that requires certain steps from financial institutions as part of their anti-money laundering program.
The Bank Secrecy Act of 1970 (BSA ‘70)
as an anti-money laundering measure, BSA ‘70 requires financial institutions to keep a
Monetary Instrument Log
as an anti-money laundering measure, BSA ‘70 requires financial institutions to keep a
Monetary Instrument Log (MIL)
A Monetary Instrument Log (MIL) records
cash purchases of monetary instruments
monetary instruments tracked in A Monetary Instrument Log (MIL) include
Money orders
Cashiers checks
Traveler’s checks
Monetary Instrument Log must record cash purchases of monetary instruments with a value over
$3,000
A financial institution must maintain records in the MIL
for five years.
as an anti-money laundering measure, BSA ‘70 requires financial institutions to file
Currency Transaction Reports (CTR)
Currency Transaction Reports (CTR’s) are filed with
the IRS
CTR’s must be filed with the IRS on any cash transaction above
$10,000 in one day
the 10,000 threshold for filing a CTR with the IRS can come from
several smaller transactions
as an anti-money laundering measure, BSA ‘70 requires that when financial institutions observe possible BSA violations they must file a
Suspicious Activity Report (SAR)
Exam loves this one!!!
BSA ‘70 requires financial institutions to file an SAR on any client who appears to be avoiding
Bank Security Act reporting requirements (i.e., filing MILs or CTRs)
BSA ‘70 requires financial institutions to file an SAR on any client who is behaving
in a way that suggests money laundering or other illegal activity.
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows the funds are
derived from illegal activity
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was intended to hide or disguise
funds or assets derived from illegal activity,
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was designed to evade
reporting requirements or other laws/regulations
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows There was no
business or apparent lawful purpose for the transaction
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker dealer suspects or knows The transaction was not
typical for the customer
BSA ‘70 requires financial institutions to file an SAR when a client makes a transaction that is at least $5K and the broker-dealer knows of no reasonable
explanation for transaction after examining all available facts.
At what point in the money laundering process is the money no longer traceable?
Integration
An example of placement is cash routed through
front operations
An example of placement is cash converted to
cashiers checks
An example of layering is transferring money
across several accounts and different companies
An example of layering is moving money into a
shell company
transactions recorded in MIL’s don’t have to be reported
outside the firm
ongoing amount of transactions that is suspicious
consistently just under 10,000
Another name for an SAR is
a FinCEN
