The NASD Anti-Money Laundering (AML) regulations, which are largely based on the United States Department of Treasury regulations construing AML provisions under the Patriot Act, require each broker/dealer to conduct annual independent reviews/audits of their respective AML compliance programs.
The first of these independent audits were to have been done by all broker/dealers by April 24, 2003 (the one-year anniversary of the start date of the AML regulations related to broker/dealers). Independent audits are required to be performed at least once a year following the date on which a broker/dealer did its last annual audit.
When the SEC conducts a regular examination of a broker/dealer, it has indicated its intention to focus on confirming that such independent audits are taking place, as and when required, and to ask for a copy of the independent auditor’s report on findings. Additionally, the SEC and the NASD have indicated they will also focus on whether the audit was sufficiently independent.
Independent audits can be performed by either broker/dealer personnel or a qualified outside party. However, the NASD has made clear that if a broker/dealer uses internal personnel then sufficient separation of functions should be maintained in order to ensure the independence of the testing personnel. It has also been directed that internal testing personnel should be sufficiently trained in all aspects of the AML rules and regulations to be able to adequately perform the audit.