Written by: Mark E. Ruddy, Esq.
Jessica I. Brown, CAMS
FINANCIAL CRIMES ENFORCEMENT NETWORK
Update to FATF List of Jurisdictions with AML/CFT Deficiencies
On April 5, 2017, the Financial Crimes Enforcement Network (“FinCEN”) issued an advisory announcing that the Financial Action Task Force (“FATF”) updated its lists of identified jurisdictions with strategic deficiencies in their frameworks to combat money laundering and the financing of terrorism and proliferation. The purposes of FATF’s lists are to track and monitor compliance with the international anti-money laundering and countering the financing of terrorism (“AML/CFT”) standards. The changes to FATF’s list may affect US financial institutions’ obligation and risk-based approaches with respect to relevant jurisdictions.
As per FATF’s February 2017 Public Statement, the list of jurisdictions have been updated to include the following:
- Jurisdiction subject to effective counter-measures
- Democratic People’s Republic of Korea
- Jurisdiction subject to enhanced due diligence
- Iran
- Jurisdiction identified as having AML/CFT deficiencies
- Ethiopia
Updates to the FATF list are outlined in FinCEN Advisory FIN-2017-A002.
NATIONAL FUTURES ASSOCIATION
AML Programs
In response to FATF’s update to its list of jurisdictions with strategic AML/CFT deficiencies, the National Futures Association (“NFA”) published Notice to Members I-17-09 on April 10, 2017. The notice encouraged futures commission merchants (“FCMs”) and introducing brokers to review their AML programs to ensure compliance with the latest updates to the FATF list.
Quarterly Reporting Requirements
Each commodity pool operator (“CPO”) Member and commodity trading advisor (“CTA”) Member with reporting requirements under Commodity Futures Trading Commission (“CFTC”) Regulation 4.27 is required to comply with NFA quarterly reporting requirements. NFA Compliance Rule 2-46 imposes quarterly reporting requirements on CPOs operating commodity pools and on CTAs that direct trading of commodity interests.
The CTA quarterly report (“Form CPR”) is used to collect general information about the reporting CTA and its trading program(s). For the period ending March 31, 2017, CTAs are required to submit Form CPR by Monday, May 15, 2017.
A CPO must report specific information about the firm and the pools it operates on the CPO quarterly report (“Form PQR”). For the period ending March 31, 2017, CPOs are required to submit Form PQR by Tuesday, May 30, 2017.
The quarterly reports are required to be filed in a timely manner. Failure to file reports by the required due date is a violation of NFA Compliance Rules and CFTC Regulations. CPOs and CTAs that do not comply with filing deadlines could be subject to disciplinary action. Form CPR and Form PQR must be filed electronically using NFA’s EasyFile system.
COMMODITY FUTURES TRADING COMMISSION
Extension of Relief for Swaps Dealers Doing Business in Europe
The CFTC Division of Swap Dealer and Intermediary Oversight (“DSIO”) has extended the time limited no-action relief for swap dealers doing business in Europe. CFTC Press Release 7548-17 announced the issuance of DSIO No-Action Letter 17-22, which extended the time-limited no-action relief from May 8, 2017 until November 7, 2017. DSIO Letter 17-22 extends the time-limited no-action relief originally granted in No-Action Letter 17-05. The DSIO is still conducting a comparison of European Union’s (“EU”) non-centrally cleared over-the-counter derivative margin requirements “(EMIR RTS”) to the CFTC’s Final Margin Rule. Letter 17-05 granted relief from certain aspects of the Final Margin Rule from period February 4, 2017 through May 8, 2017. As per Letter 17-22, the DSIO will continue to grant relief and not recommend enforcement action against swap dealers complying with the EMIR RTS while they are still conducting the comparison. Swap dealers should review Letter 17-22 for further explanation of EU uncleared swap margin requirements.
Petition Regarding Comingling of Funds
The Chicago Mercantile Exchange Inc. (“CME”) submitted a request (“CME Request”) to the CFTC to amend the clearing order granted pursuant to Section 4d(a)(2) of the Commodity Exchange Act (“CEA”). The CFTC order granted in 2012, between the CME and the Dubai Mercantile Exchange Limited (“DME”), permitted CME and CFTC registered FCMs to hold customer positions in certain futures listed on the DME, along with associated funds, in accounts that are subject to the segregation requirements. The applicable segregation requirements are covered in Section 4d of the CEA and CFTC Regulation 1.20. The CME Request, dated March 13, 2017, summarized the 2012 order and outlines the petition for the CFTC to permit comingling of funds in connections with foreign futures contracts listed on the DME.
The CFTC is seeking public comments on the CME Request. Comments regarding the request should be submitted on or before April 28, 2017. Comments are to be submitted online.
For further information about any of the topics covered, please feel free to contact the Ruddy Gregory, PLLC (www.ruddylaw.com) or 202-797-0762.
