Account Opening and AML

The whole onboarding front door on one sheet: what to collect, how to verify, what to report, and what to keep.

Intake, Identity, and the AML Program

• Customer-account information captures name, residence, legal age, taxpayer identification number (TIN), the servicing representative, and the approving principal. Only the accepting principal's signature is required, not the representative's.
• Legal age is set by the customer's state of residence, not the firm's home state.
• Non-institutional accounts add a Trusted Contact Person (TCP) request (age 18+, contact-only, cannot trade), employment details, and FINRA-affiliation disclosure. The firm must ask; the customer need not designate.
• Custodial accounts use the minor's TIN, not the custodian's. Margin needs a signed margin and hypothecation agreement obtained promptly after the first margin trade (not before it).
• Customer Identification Program (CIP) forms a reasonable belief in the customer's true identity via four elements: name, date of birth, address, identification number. A physical street address is required; a Post Office box alone is not.
• Verification is risk-based (documentary, non-documentary, or both). Failure to verify means deny or close the account plus a possible Suspicious Activity Report (SAR).
• The AML program needs five pillars: policies and procedures, independent testing, a designated AML Compliance Officer (AMLCO), ongoing training, and Customer Due Diligence (CDD) with beneficial-ownership identification.

The One-Liners That Win Points

• Currency Transaction Report (CTR) = over $10,000 cash, objective trigger. SAR = $5,000 plus subjective suspicion. Do not swap them.
• Beneficial ownership (25%+ owners plus one control person) is a CDD pillar, not a CIP element.
• Independent testing is annual for customer-facing firms, biennial for proprietary-only firms; the tester cannot report to the anti-money laundering compliance officer (AMLCO).
• Office of Foreign Assets Control (OFAC) runs the Specially Designated Nationals (SDN) sanctions list; FinCEN administers the Bank Secrecy Act and receives CTRs and SARs.
• Block versus reject: freeze an SDN's property (blockable interest), refuse an SDN counterparty trade (rejectable).
• Automated Customer Account Transfer Service (ACATS) transfers move on a customer-signed Transfer Instruction Form (TIF); the receiving firm starts, the carrying firm executes.
• A firm may not interfere with a customer's transfer when the rep changes firms, unless the account is subject to a lien for money the customer owes or another bona fide claim. A lien is not an exception ground under the account-transfer rule.
• Regulation S-P guards information inside the firm; Regulation S-ID guards against outside impersonators.

Numbers to Lock In

Memory Aid: The Five AML Pillars

Picture five columns holding up a vault: Policies, Independent testing, the AMLCO, Training, and Customer Due Diligence. Pull one column and the vault collapses.

Top Gotchas

• SAR existence is strictly confidential. Telling the customer a SAR was filed is a federal crime (tipping off); the safe harbor protects filing, not disclosure.
• CTR is exceed $10,000, not equal to. $10,000 exactly does not trigger a CTR; $10,000.01 does. Three $4,000 same-day cash deposits also aggregate to one.
• Structuring (splitting deposits under $10,000 to dodge a CTR) triggers a SAR, not a CTR, and is itself a federal crime.
• CIP retention is 5 years after closure; customer-account records run 6 years. The exam exploits the one-year gap.
• CIP requires four elements (name, date of birth, address, identification number); do not add a fifth. Beneficial ownership lives in CDD.
• Numbered accounts are legal only with a signed ownership statement; they are never anonymous, since the firm always knows the true identity.

One-Breath Recap

Onboarding stacks three layers: customer-account information collects identity and contact data (the principal signs to accept, updated every 36 months, kept 6 years after closure), the Customer Identification Program verifies four elements and holds records 5 years after closure, and the anti-money-laundering program stands on five pillars. Two Bank Secrecy Act filings run the exam: the Currency Transaction Report for cash over $10,000 within 15 days (objective) and the Suspicious Activity Report at $5,000 within 30 days with suspicion (strictly confidential, tipping off is a crime). Office of Foreign Assets Control screens sanctions, FinCEN takes the filings, the Automated Customer Account Transfer Service (ACATS) moves accounts on a customer-signed form the firm cannot obstruct, and Regulation S-P and Regulation S-ID guard information from the inside and impersonators from the outside.

Need more than the recap? Read the full Account Opening and AML unit.