Approval by SEC of Rule G-41, on Anti-Money Laundering Compliance
On July 11, 2003, the Securities and Exchange Commission (“Commission” or “SEC”) approved proposed rule change SR-MSRB-2003-04 establishing Municipal Securities Rulemaking Board (“MSRB”) Rule G-41, on anti-money laundering compliance.[1] The MSRB filed proposed Rule G-41, on anti-money laundering compliance, in response to the passage of the USA PATRIOT Act[2] which required financial institutions, including broker/dealers, to establish and implement anti-money laundering compliance programs designed to ensure ongoing compliance with the requirements of the Bank Secrecy Act[3] and the regulations promulgated thereunder by April 24, 2002.
The MSRB proposed Rule G-41 to ensure that all brokers, dealers and municipal securities dealers (“dealers”)[4] that effect transactions in municipal securities, and in particular those that only effect transactions in municipal securities (“sole municipal dealers”), are aware of, and in compliance with, anti-money laundering compliance program requirements. Thus, Rule G-41 requires that all dealers establish and implement anti-money laundering programs that are in compliance with the rules and regulations of either its registered securities association (i.e., NASD) or its appropriate banking regulator governing the establishment and maintenance of anti-money laundering programs.
The adoption of Rule G-41 will provide clarity to dealers and examiners concerning the rules and regulations that dealers who effect transactions in municipal securities must comply with concerning the development of anti-money laundering compliance programs; it will not impose any new or different obligations upon such dealers. Below is the text of the rule change. New language is underlined.
July 16, 2003
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Rule G-41: Anti-Money Laundering Compliance Program
No broker, dealer or municipal securities dealer shall be qualified for purposes of Rule G-2 unless such broker, dealer or municipal securities dealer has met the anti-money laundering compliance program rules set forth by either the registered securities association of which the dealer is a member (e.g., NASD Rule 3011), or the rules set forth by the appropriate regulatory agency as defined in Section 3(a)(34) of the Act with respect to any other broker, dealer or municipal securities dealer (e.g., 12 C.F.R. 21.21 (OCC); 12 C.F.R. 208.63 (FRB); 12 C.F.R. 326.8 (FDIC); and 12 C.F.R. 563.177 (OTS)), to the same extent as if such rules were applicable to such broker, dealer or municipal securities dealer.
[1] See Release No. 34-48169 (July 11, 2003).
[2] Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Pub. L. No. 107-56, 115 Stat. 272 (2001).
[3] 31 U.S.C. 5311, et seq.
[4] The term “dealer” is used herein as shorthand for “broker,” “dealer” or “municipal securities dealer,” as those terms are defined in the Securities Exchange Act of 1934. The use of the term does not imply that the entity is necessarily taking a principal position in a municipal security.
