It depends on the arrangement. Some networking arrangements may involve a broker simply selling in the bank, others may involve co-branding bank products. The answer depends on the type of relationship. Before entering into a relationship of any type, the bank should carefully vet the third party. The risk management evaluation process, should include, but not limited to:
- Assessing the broker/dealer’s financial status, and reputation
- Determining the ability to fulfill BSA/AML compliance responsibilities (with regard to bank customers, SAR, registering and registering representatives)
- Performing due diligence to determine that policies, procedures, and processes are in place to enable the broker/dealer to meet legal responsibilities and obligations;\
- Reviewing any policies, procedures to ensure they meet the bank’s requirements
- Having in place processes to mitigate risk exposure
- Creating a detailed written contract that addresses these items, as well as responsibilities for liability, remedies, etc.
In addition, the bank should maintain documentation, get Board approval, and implement periodic review and testing as applicable.
Reference: Bank Secrecy Act Anti-Money Laundering Examination Manual, Nondeposit Investment Products – Overview, FFIEC BSA/aml infobase