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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

BD Fined for Failed AML Compliance

A broker-dealer was censured, fined $200,000, and ordered to hire an independent compliance consultant for failing to file Suspicious Activity Reports.  The SEC argues that the firm should have further investigated millions of penny stock transactions whereby customers deposited large blocks of penny stocks, liquidated them, and transferred the cash proceeds.  The SEC faults the BD for blindly accepting customer representations that the shares were exempt from registration under Rule 144.  The firm’s policies and procedures required a reasonable investigation into money laundering red flags.  The firm’s CCO has also been charged with wrongdoing.

OUR TAKE: Anti-Money Laundering compliance and the timely filing of SARs remain priority issues for both the SEC and FINRA.  FinCEN may also weigh in with criminal penalties including huge fines and jail time.

https://www.sec.gov/litigation/admin/2017/33-10392.pdf