Money laundering and securities brokers

Context, regulation and KYC implementation

Abstract

The complexity of Anti-money laundering regulatory standards is a major source of compliance risks for financial institutions regulated by the Central Bank of Brazil and the Brazilian Securities and Exchange Commission. This complexity arises from several factors, such as international documents, national laws, the reality of technological evolution and criminal practices, as well as market demands. For this reason, managing these risks requires the adoption of a robust and adaptable methodology to different contexts, capable of preventing money laundering without negatively impacting business operations, and even creating value for the organization. This paper aims to demonstrate, through examples, the applicability of the COSO Internal Control Integrated Framework in building Kow Your Customer controls within a Foreign Exchange, Securities, and Brokerage Firm, under Brazilian laws and regulations. It will provide a contextualization of the regulations that generate obligations for institutions, and then, following COSO’s pillars, illustrate how these controls can be constructed.