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Bank-Affiliated BD Hit with a $13 Million Fine for AML Monitoring Flaws

The SEC fined a large bank-affiliated broker-dealer $13 Million for weaknesses in its anti-money laundering program and for failing to file suspicious activity reports over a 5-year period.  The SEC faults the firm for utilizing a patchwork monitoring system across its large enterprise that often failed to monitor certain accounts and uncover potential money laundering activity.  The SEC raised specific concerns about transactions in brokerage accounts that utilized banking services such as ATMs, check-writing, and wire transfers.  The firm also failed to quickly remedy some of the AML monitoring issues that it self-identified.

OUR TAKE: As firms get larger (especially through acquisition), account monitoring and AML management becomes much more difficult.  Larger firms should consider appointing an enterprise-wide AML czar to take control of all monitoring activities.

https://www.sec.gov/litigation/admin/2017/34-82382.pdf

Clearing Broker Charged with Failing to File SARs

 The SEC instituted enforcement proceedings against a clearing broker for failing to file required Suspicious Activity Reports as required by the Bank Secrecy Act.  Although the broker-dealer had appropriate Written Supervisory Procedures, the firm failed in practice to implement its compliance program.  The firm filed nearly 2000 SARs that omitted necessary descriptive information, failed to file follow-up SARs with respect to another 1900 transactions, and did not file 250 SARs within the required time frames.  The SEC claims that the deficient SARs “facilitated illicit actors’ evasion of scrutiny by U.S. regulators and law enforcement.”

OUR TAKE: The BSA is no joke.  Failure to file SARs can result in crippling fines (up to $25,000 per failed SAR) and land you in jail.  It should be Chapter 1 of a broker-dealer’s compliance program.

https://www.sec.gov/litigation/complaints/2017/comp-pr2017-112.pdf