[Federal Register Volume 67, Number 119 (Thursday, June 20, 2002)]
[Notices]
[Pages 42086-42088]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-15574]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-46075; File No. SR-Amex-2002-52]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the American Stock Exchange LLC To Require Members and Member 
Organizations To Establish Anti-Money Laundering Compliance Programs

June 13, 2002.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on June 3, 2002, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to adopt Amex Rule 431 (Anti-Money Laundering 
Compliance Program) to require members and member organizations to 
establish anti-money laundering programs meeting specific minimum 
standards. The text of the proposed rule change is below. Proposed new 
language is in italics.\3\
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    \3\ The Amex did not underscore all of the proposed new language 
in its Form 19b-4. Rather than require the Amex to file an amendment 
to correct this technical omission, the Commission added the missing 
underscoring, to ensure that all proposed new language appears in 
italics in the Federal Register.
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Anti-Money Laundering Compliance Program

    Rule 431. Each member organization and each member not associated 
with a member organization shall develop and implement a written anti-
money laundering program reasonably designed to achieve and monitor 
compliance with the requirements of the Bank Secrecy Act (31 U.S.C. 
5311, et

[[Page 42087]]

seq.), and the implementing regulations promulgated thereunder by the 
Department of the Treasury. Each member organization's anti-money 
laundering program must be approved, in writing, by a member of senior 
management.
    The anti-money laundering programs required by this Rule shall, at 
a minimum:
    (1) Establish and implement policies and procedures that can be 
reasonably expected to detect and cause the reporting of transactions 
required under 31 U.S.C. 5318(g) and the implementing regulations 
thereunder;
    (2) Establish and implement policies, procedures and internal 
controls reasonably designed to achieve compliance with the Bank 
Secrecy Act and the implementing regulations thereunder;
    (3) Provide for independent testing for compliance to be conducted 
by member or member organization personnel or by a qualified outside 
party;
    (4) Designate a person or persons responsible for implementing and 
monitoring the day-to-day operations and internal controls of the 
program; and
    (5) Provide ongoing training for appropriate persons.
* * * * *

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In response to the events of September 11, 2001, President Bush 
signed into law on October 26, 2001 the Uniting and Strengthening 
America by Providing Appropriate Tools Required to Intercept and 
Obstruct Terrorism Act of 2001 (the ``Patriot Act'') to address 
terrorists threats through enhanced domestic security measures, 
expanded surveillance powers, increased information sharing and 
broadened anti-money laundering requirements. The Patriot Act amends, 
among other laws, the Bank Secrecy Act, as set forth in Title 31 of the 
United States Code. Certain provisions of Title III of the Patriot Act, 
also known as the International Money Laundering Abatement and Anti-
Terrorist Financing Act of 2001 (``MLAA''), impose affirmative 
obligations on a broad range of financial institutions, including 
broker-dealers, specifically requiring the establishment of anti-money 
laundering monitoring and supervisory programs.
    MLAA Section 352 required all financial institutions (including 
broker-dealers) to establish anti-money laundering programs by April 
24, 2002, that include, at a minimum: (i) Internal policies, procedures 
and controls; (ii) specific designation of an anti-money laundering 
compliance officer; (iii) ongoing employee training programs; and (iv) 
an independent audit function to test the anti-money laundering 
program.
    In addition to requiring the establishment of anti-money laundering 
programs, the MLAA imposes additional obligations, including, without 
limitation:

--Implementation of special measures with respect to transactions 
involving ``Primary Money Laundering Concerns'' (``PMLCs'' are 
particular foreign jurisdictions designated by the Department of 
Treasury), including obtaining and maintaining records of beneficial 
ownership of accounts;
--Cooperation and information sharing among law enforcement and 
regulators concerning information about individuals or entities engaged 
in or suspected of money laundering or terrorism;
--Identification and verification of owners of new accounts for both 
domestic and foreign customers; and
--Prohibition on financial institutions from establishing, maintaining, 
administering or managing correspondent accounts for foreign shell 
banks (banks with no physical presence in their offshore jurisdiction).

    Additionally, the rules to be issued by the Department of Treasury 
in conjunction with the Commission and the Federal Reserve Board on or 
about July 1, 2002 will require registered securities brokers and 
dealers, among others, to file Suspicious Activity Reports pursuant to 
Section 356 of the Patriot Act.
    The Commission has already approved the New York Stock Exchange's 
(``NYSE'') and the National Association of Securities Dealers, Inc.'s 
(``NASD'') proposed rule changes adopting respective new rules 
requiring their members and member organizations to establish anti-
money laundering compliance programs with the minimum standards 
described above.\4\ Proposed Amex Rule 431 involves a similar 
requirement. The Amex is the designated examining authority for almost 
300 broker-dealers. Virtually all of those firms clear through other 
brokerage firms that are either NYSE or NASD members and, therefore, do 
not carry customer funds or securities on their own. While the clearing 
firms will have primary responsibility for anti-money laundering 
compliance, all broker-dealers are covered by the law. In implementing 
the proposed rule, the Amex will make sure that the specific standards 
it develops, and the Amex's enforcement of the Rule, recognizes the 
significant differences between self-clearing firms and those that do 
not handle customer funds or securities, or do not maintain customer 
accounts.
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    \4\ See Securities Exchange Act Release No. 45798 (April 22, 
2002), 67 FR 20854 (April 26, 2002)(SR-NASD-2002-24 and SR-NYSE-
2002-10)(approval order).
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    As noted above, many of the federal regulations that will help 
clarify the application of the requirements of the Patriot Act to our 
members and member organizations are awaiting issuance in the coming 
months. Adoption of proposed Amex Rule 431 establishes a regulatory 
framework for members and member organizations pending issuance of 
further regulatory guidance.
2. Statutory Basis
    The Amex believes that the proposed rule change is consistent with 
Section 6(b) of the Act \5\ in general and furthers the objectives of 
Section 6(b)(5) \6\ in particular in that it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in facilitating transactions in securities, and to 
remove impediments to and perfect the mechanism of a free and open 
market and a national market system, and, in general to protect 
investors and the public interest, and is not designed to permit unfair 
discrimination between customers, issuers, brokers or dealers.
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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition.

[[Page 42088]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will:
    A. By order approve such proposed rule change, or
    B. Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Room. Copies of such filing will also be 
available for inspection and copying at the principal office of the 
Amex. All submissions should refer to file number SR-Amex-2002-52 and 
should be submitted by July 11, 2002.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority. \7\
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    \7\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-15574 Filed 6-19-02; 8:45 am]
BILLING CODE 8010-01-P