Why Securities and Commodities Dealers are exposed to financial crime risk
Securities and Commodities Dealers are attractive to organised criminal networks because they provide access to liquid, high-value markets where illicit funds can be rapidly moved, layered or disguised through complex trading strategies, margin accounts or cross-border transactions.
The fast-paced nature of securities trading, use of intermediaries and reliance on omnibus or nominee accounts can obscure beneficial ownership and make it difficult to trace the true source or purpose of funds. To mitigate these risks, it is essential that Securities and Commodities Dealers maintain a robust, enterprise-wide money laundering, terrorism and proliferation financing risk assessment framework.
By continuously identifying, assessing and understanding their exposure to financial crime threats and by testing the design and operational effectiveness of their controls in a way that is appropriate and proportionate to their business model, size and complexity they can protect market integrity, ensure regulatory compliance and uphold client and investor confidence.
For Money Laundering Reporting Officers (MLROs) and senior compliance leaders at Securities and Commodities Dealers, the task isn’t simply to satisfy minimum requirements – it’s to demonstrate a deep, defensible understanding of risk that stands up to regulatory review, supports business decision-making and drives proportionate control execution.
Arctic Intelligence’s ML/TF/PF Risk and Control Assessment Solution has been developed specifically for Securities and Commodities Dealers. It supports Securities and Commodities Dealers in meeting regulatory expectations, providing a structured, evidence-based, regulator-ready framework that empowers teams to identify, assess and govern financial crime risk across every line of business.
Why Securities and Commodities Dealers are targeted by organised criminal networks
Securities and Commodities Dealers are inherently exposed to financial crime risk for several reasons:
- Central Role in Capital and Commodity Markets: Dealers act as primary intermediaries in securities and commodities trading, clearing and settlement, making them key gateways through which illicit funds can be invested, converted and integrated into legitimate market activity.
- High-Value, High-Velocity Trading Activity: Equities, derivatives, commodities and OTC markets involve rapid execution of high-value transactions, creating scale and velocity that can obscure suspicious trading patterns without sophisticated, real-time surveillance and AML controls.
- Complex Product Suites and Market Instruments: Structured products, derivatives, options, futures and leveraged instruments can be misused to layer and disguise illicit funds through complex trading strategies and circular trading patterns.
- Cross-Border Trading and Clearing Exposure: International market access, offshore trading venues, cross-border clearing arrangements and foreign counterparties expose dealers to high-risk jurisdictions, sanctions regimes and proliferation financing corridors.
- Use of Prime Brokerage and Introducing Brokers: Prime brokerage relationships, introducing brokers and clearing arrangements can introduce clients and trading flows with variable levels of verification and transparency.
- Opaque Ownership and Custody Structures: Custody chains, nominee accounts, omnibus accounts and layered corporate vehicles can obscure beneficial ownership and economic purpose if not rigorously governed.
- Digital Trading Platforms and Third-Party Integrations: Electronic trading platforms, market access gateways, API trading tools and outsourced clearing providers introduce additional entry points for illicit funds and potential fragmentation of AML/CTF controls if not governed through integrated risk frameworks.
Taken together, these features make Securities and Commodities Dealers a primary target for organised criminal networks and place enterprise-wide, evidence-based ML/TF/PF risk assessment at the centre of regulatory expectations.
Introducing Arctic Intelligence’s ML/TF/PF Risk and Control Module for Securities and Commodities Dealers
Arctic Intelligence’s Securities and Commodities Dealers Risk and Control Module provides a comprehensive and configurable foundation for conducting robust, enterprise-wide ML/TF/PF risk assessments tailored to retail, commercial, institutional and private banking operations. This module enables Securities and Commodities Dealers to:
- Identify and Prioritise ML/TF/PF Risks: Using securities and commodities-specific risk taxonomies aligned to FATF and supervisory expectations, the module guides dealers through identifying the highest-impact risk areas across client and counterparty profiles, trading products and market instruments, execution and clearing channels, settlement and custody flows, and geographic and jurisdictional exposures.
- Assess Controls and Operational Effectiveness: Moving beyond static compliance checklists, the solution maps controls to real capital-markets risk drivers and enables testing of both design and operational effectiveness allowing dealers to demonstrate, with evidence, that controls are operating as intended.
- Calculate Residual Risk Transparently: Residual risk reflects a dealer’s true financial crime exposure. Arctic’s module aggregates inherent risk indicators with control performance data to produce defensible residual risk ratings that are directly aligned to risk appetite, escalation thresholds and governance frameworks.
- Produce Audit-Ready Documentation: Built-in audit trails, version history, review workflows and aggregated reporting provide regulators, internal audit and senior management with transparent, evidence-based documentation explaining how financial crime risk conclusions were reached and governed.
This solution embeds banking-specific typologies, regulatory best practice and global risk methodologies into a scalable, configurable risk and control platform that supports consistent application across business lines, geographies and legal entities.
The built-in audit trail, review logs and Board-ready reporting enable stronger governance oversight while making complex risk outcomes digestible for executives and boards.
Who does this module apply to?
The money laundering, terrorism and proliferation financing risk and control module contains a library of risks, controls and control tests designed specifically for different types of Securities and Commodities Dealers:
| Broker-Dealers | Brokerage Firms |
| Execution-Only Brokers | Full-Service Brokers |
| Futures and Options Brokers | Securities Dealers |
| Investment Brokerage Firms | Online Brokerage Platforms |
| Pension Fund Trustees | Proprietary Trading Firms |
| Financial Intermediaries | Retail Brokers |
| Commodities Dealers | Institutional Brokers |
| Stockbrokers | Trading Dealers |
What does this module contain?
A. Enterprise-wide ML/TF/PF risk assessment, covering the following risk groups:
- Environmental Risk – covering exposure to internal and external risk indicators.
- Customer Risk – covering customer base profile, customer location risk, legal form risk, industry / occupation risk, PEP risk and customer activity risk.
- Product and Services Risk – covering the services provided by Securities and Commodities Dealers that are subject to AML/CTF laws and the inherent risk characteristics of each of these.
- Channel Risk – covering face-to-face and non-face-to-face customer onboarding and transaction channels.
- Transaction Risk – covering higher risk transaction types.
- Country Risk – covering higher risk country risk exposures based on the residency, nationality or citizenship (Individuals) and country of registration, incorporation, domicile or operations (Entities).
These modules also include a comprehensive library of suggested controls and control tests to support design and operational effectiveness testing.
Securities and Commodities Dealers can deploy the content module out-of-the-box or tailor it to their methodology, eliminating the need to start from scratch while maintaining full ownership of their risk model. It also allows firms to import their own risk indicators and controls or enhance the expert-built libraries to suit their bespoke risk methodology and regulatory environment.
B. Product and Services ML/TF/PF risk assessment module, covering different products and services, with inherent ML/TF/PF risk attributes of each over the following risk groups:
- Investment and Wealth Management Products – Administrator Services, Asset Management, Custodial or Depository Services, Discretionary Portfolio Management, Private Banking and Trust and Escrow Accounts.
- Investment Products – covering Commodities Hedging Products, Exchange Traded Funds, FX Hedging Products, Interest Rate Derivatives, Investment Funds, Margin Loans, Secondary Market Trading of Commercial Loans, Securitisation, Structured Equity and Equity Products, Trading in Bonds, Commodities, Currencies, Derivatives and Equities and Unit Trusts.
C. Channel ML/TF/PF risk assessment module, covering over 30 different inherent ML/TF/PF risk attributes of each over the following risk groups:
- Face-to-Face Channels – covering Internal Physical Channels; Relationship Managed Physical Channels and External Physical Channels.
- Non-Face-to-Face Channels – covering Internal Remote Assisted Channels; Internal Manual Channels; Internal Digital Self-Service Channels; Internal Programmatic / Embedded Access Channels; External Interbank and Payment Infrastructure Channels and External Digital Channels.
- Face-to-Face or Non-Face-to-Face Channels – External Partner Intermediary Channels.
- Customer Onboarding Channels (General) – Channel type; onboarding through face-to-face channels and non-face-to-face channels and customer onboarding through intermediaries.
- Transaction and Delivery Channels – Value of transactions by delivery channel type.
- General Channel Risks – Higher channel risk indicators.
Get started with Arctic Intelligence
Whether you are establishing your first enterprise-wide ML/TF/PF risk assessment or upgrading a legacy spreadsheet-based program, Arctic Intelligence’s Securities and Commodities Dealers Risk and Control Module is a scalable, defendable and configurable solution that meets the needs of modern compliance teams.
Book a demo or contact us to explore how our platform can help your business strengthen compliance, mitigate financial crime risk and build a risk program that stands up to regulatory scrutiny.
Or visit our website to learn more.
