TO:                 Chief Executive Officers                                                                                #19-01

                       Chief Financial Officers

                       Chief Compliance Officers

DATE:             July 2, 2019

SUBJECT:  Amendments to CME, CBOT and NYMEX/COMEX Rule 981. Anti-Money Laundering and Economic Sanctions Compliance

Effective July 17, 2019, and pending all relevant CFTC regulatory review periods, CME, CBOT and NYMEX/COMEX (collectively, the “Exchanges”) will adopt amendments to Rule 981. Anti-Money Laundering and Economic Sanctions Compliance to incorporate due diligence requirements.

In May of 2016, Financial Crimes Enforcement Network (“FinCEN”) adopted final rules under the Bank Secrecy Act regarding due diligence requirements of FCMs.  The additional requirements provide that an FCM’s Anti-Money Laundering (“AML”) Program must have appropriate risk-based procedures for conducting ongoing customer due diligence, including, but not limited to: (a) understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and (b) conducting ongoing monitoring to identify and report suspicious transactions and, on a risk basis, to maintain and update customer information, including information regarding the beneficial owners of legal entity customers.  These rules became effective in May 2018.

In June 2018, the National Futures Association (“NFA”) amended its Rule 2-9(c) to reflect these new requirements and modified its Interpretative Notice 9045 to provide guidance to FCMs.  While the Financial and Regulatory Surveillance Department has been reviewing for these new requirements in its examinations, the Exchanges are now amending Rule 981. to incorporate these new requirements and provide consistency for clearing members across all anti-money laundering rules applicable to them.

The amended rule with additions underscored and deletions overstruck is stated on the following page.

If you have any questions, please contact the Financial and Regulatory Surveillance Department at 312-930-3230.

981.     ANTI-MONEY LAUNDERING AND ECONOMIC SANCTIONS COMPLIANCE

Each clearing member shall develop and implement a written compliance program approved in writing by senior management reasonably designed to achieve and monitor the clearing member’s compliance with all applicable requirements of the Bank Secrecy Act (31 U.S.C. § 5311 et seq.), the International Emergency Economic Powers Act (50 U.S.C. § 1701 et seq. ) (“IEEPA”), the Trading with the Enemy Act (50 U.S.C. App. § 1 et seq.) (“TWEA”), and the Executive Orders and regulations issued pursuant thereto, including the regulations issued by the U.S. Department of the Treasury and, as applicable, the Commodity Futures Trading Commission. That compliance program shall, at a minimum,

1.   Establish and implement policies, procedures and internal controls reasonably designed to prevent the financial institution from being used for money laundering or the financing of terrorist activities and to achieve assure compliance with all applicable provisions of the Bank Secrecy Act, IEEPA, TWEA, and all applicable Executive Orders and regulations issued pursuant thereto;

2.  Provide for independent testing for compliance to be conducted by clearing member personnel or by a qualified outside party;

3.   Designate an individual or individuals responsible for implementing and monitoring the day- to-day operations and internal controls of the program; and

4.   Provide ongoing training for appropriate personnel.; and

5.  Include appropriate risk-based procedures for conducting ongoing customer due diligence, including, but not limited to:

a.  understanding the nature and purpose of customer relationships for the purpose of developing a customer risk profile; and

b.  conducting ongoing monitoring to identify and report suspicious transactions, and, on a risk basis, to maintain and update customer information, including the information regarding the beneficial owners of legal entity customers.

Clearing members must also supervise and ensure that their guaranteed introducing brokers are in compliance with the provisions contained in this Rule.