NFA issues alert to FCM and IB members regarding onboarding new customers

The National Futures Association (NFA) has issued an alert to futures commission merchants (FCMs) and introducing brokers (IBs) regarding the onboarding of new customers.

NFA has recently become aware of several incidents where persons have opened trading accounts using falsified customer identification documents and/or made false representations regarding entities and individuals that do not exist. Once those accounts have been established, customers have engaged in trading activity that resulted in large swings in profit or loss with immediate requests to withdraw funds and/or failures to meet margin calls.

NFA seeks to ensure that all FCM and IB Members are aware of this activity and encourage them to consider it when onboarding new accounts.

Last month, the ICE Futures U.S. Market Regulation Department issued an advisory to inform IBs and FCMs about the importance of exercising increased caution when onboarding a new individual or company client.

The Department has identified several apparent suspicious actions by certain new clients that IBs and FCMs should beware of when onboarding a client or once an account has been established, including:

• use of falsified documents, such as falsified passports and account/bank statements;
• submission of false information and/or attestations;
• representation of entities and individuals that do not exist;
• trading in a manner that results in large swings in profit or losses to an account;
• immediate or prompt requests for fund withdrawals via wire transfer;
• client not communicating with the FCM/IB when asked questions;
• failures to meet margin calls;
• failures to comply with a request for testimony from the Department; and
• impersonation of an individual during an interview with the Department.