Financial Crimes Enforcement Network
The Financial Action Task Force (“FATF”) updated its list of jurisdictions with strategic anti-money laundering (“AML”) and counter-terrorist financing (“CFT”) deficiencies. In response, the Financial Crimes Enforcement Network (“FinCEN”) issued an advisory in January announcing the updates to the list of jurisdictions identified as having strategic deficiencies in their AML/CFT regimes. Countries with inadequate AML/CFT programs, as identified by FATF, are categorized as: (i) jurisdictions that are subject to FATF’s call for countermeasures or are subject to enhanced due diligence (“EDD”) due to their AML/CFT deficiencies; and (ii) jurisdictions identified by FATF to have AML/CFT deficiencies. Countries subject to EDD or countermeasures are identified on the FATF Public Statement and the list of countries with strategic AML/CFT deficiencies is available in FATF’s Improving Global AML/CFTC Compliance; On-Going Process. FinCEN’s advisory, FIN-2016-A0001, urges financial institutions to review the changes to the list of jurisdictions to ensure that their AML programs are current and remain compliant with AML/CFT requirements.
National Futures Association
AML Requirements for Futures Commission Merchants and Introducing Brokers
In response to the FinCEN advisory, above, the National Futures Association (“NFA”) released Notice to Members I-16-06 the end of January. The NFA Notice advised Member futures commission merchants (“FCMs”) and introducing brokers (“IBs”) to review the FinCEN advisory. Based on the FinCEN advisory, FCMs and IBs should update their AML programs to ensure the policies and procedures include the most current FATF information regarding jurisdictions with AML/CFT deficiencies.
Commodity Futures Trading Commission
Temporary Relief from Trade Option Filing Requirements
In May 2015, the Commodity Futures Trading Commission (“CFTC”) published a proposed amendment to CFTC Regulation 32.3 regarding trade option filing requirements. As per the proposed amendment, non-swap dealers (“SDs”) and major swap participants (“MSPs”) would no longer be required to report otherwise unreported trade options on Form TO. Every counterparty to an unreported trade option is required to annually file Form TO with the CFTC. Counterparties file Form TO to provide notice that it has entered into one (1) or more unreported trade options in the prior year. Form TO is due by March 1st following the 2015 fiscal year end.
In response to the approaching due date for Form TO and while still considering the proposed rule on trade options, the CFTC has announced temporary relief on trade option reporting. The time-limited relief was announced on February 18, 2016, by the CFTC’s Division of Market Oversight (“DMO”), in CFTC Letter 16-10. The no-action relief provided that the DMO will not recommend that the CFTC take enforcement action against non-SDs/MSPs for failing to report otherwise unreported trade options entered into during 2015 on Form TO by April 1, 2016. Further, the relief already provided by No-Action Letter 13-08, will continue to apply to trade option counterparties that are non-SDs/MSPs, as long as the non-SDs/MSPs reports the otherwise unreported trade options for 2015 on Form TO by April 1, 2016. CFTC Letter 16-10 details the time-limited no-action relief provided to end users of Form TO.
No-Action Relief Regarding Registration with Uncleared Swap Transactions
The CFTC’s Division of Swap Dealer and Intermediary Oversight (“DSIO”) has granted no-action relief regarding registration for certain foreign intermediaries in connection with uncleared swaps transactions. CFTC Letter 16-08, published February 12, 2016, outlines the no-action position of the DSIO regarding foreign intermediaries and uncleared swaps transactions. Currently, foreign intermediaries engaging in activities involving swaps are provided an exemption from registration under CFTC Regulation 3.10(c)(3)(i). The Regulation provides an exemption from registration for commodity pool operators (“CPOs”), commodity trading advisors (“CTAs”) and IBs if the foreign intermediary and the swap transaction meet the following conditions: (i) the person is located outside the United States (“US”); (ii) the person acts only on behalf of persons located outside the US; and the commodity interest transaction is submitted for clearing through a registered FCM.
The request for relief was being sought by foreign intermediaries seeking to engage in activating involving swaps not subject to CFTC clearing requirements. The DSIO granted the requested relief, observing that the regulation was not intended to impose an independent clearing requirement for swaps transactions not required to be cleared. As a result, DSIO will not recommend enforcement actions against foreign intermediaries engaged in the activities of an IB, CTA, or CPO in connection with swaps transactions not subject to CFTC clearing requirements only on behalf of persons located outside the US, for failure to register in such capacity.
For further information about any of the topics covered, please feel free to contact the Ruddy Law Office, PLLC or 202-797-0762.
