The Financial Action Task Force (FATF) published in October 2018 a “Guidance for a Risk-Based Approach for the Securities Sector” (FATF Guidance).  The FATF Guidance can be found at the FATF website: http://www.fatf-gafi.org/publications/fatfrecommendations/documents/rba-securities-sector.html . The Guidance was developed in partnership with the private sector and reflects expertise and good practices from within the industry. FIs are advised to take reference from the FATF Guidance, where appropriate for them, when reviewing the effectiveness of their AML/CFT framework.

2          The FATF Guidance aims to support the implementation of the risk-based approach (“RBA”) by FIs in the securities sector. FIs are required to identify and assess the ML/TF risks of their own business, and to then develop mitigating controls proportionate to the  risks identified and to the complexity, nature and size of the FI and its activities. The FATF Guidance provides non-exhaustive examples of the range of risk factors that may be relevant for the assessment of an FI’s ML/TF risks.

3          As there is a wide range of securities providers with different business models, the FATF Guidance clarifies the role and responsibilities of FIs that may be involved in a securities transaction, and where the FATF Recommendations apply depending on the nature of the business relationship between the parties.

4          The FATF Guidance also provides examples of indicators of suspicious activity in relation to securities sector, which FIs should consider in their ongoing transaction monitoring to determine whether transactions are consistent with the FI’s information about the customer and the nature and purpose of the business relationship.