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. Both the rep's and principal's signatures are required.
• 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 (must be 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 before the first margin trade.
• 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 AMLCO.
• Office of Foreign Assets Control (OFAC) runs sanctions and the Specially Designated Nationals (SDN) 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 Initiation Form (TIF); the receiving firm starts, the carrying firm executes.
• A firm may not block a customer's transfer to punish a departing rep; only a bona fide lien (money the customer owes) justifies delay.
• 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 bank vault: Policies write the rules, Independent testing audits them, the AMLCO is the named human on the hook, Training teaches the staff, and Customer Due Diligence keeps the customer profile current. 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 good-faith safe harbor protects filing, not disclosure.
• CTR is exceed $10,000, not equal to. Exactly $10,000 in cash does not trigger a CTR; $10,000.01 does. Three $4,000 same-day cash deposits aggregate to a CTR.
• 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 after closure. 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 customer ownership statement; they are never anonymous, and the firm always knows the true identity.

One-Breath Recap

Onboarding stacks three layers: customer-account information collects identity and contact data (both rep and principal sign, 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, 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? This is a condensed summary. If it is not enough, read the full Account Opening and AML unit for the complete lesson.