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Compliance Officer Failed to File Suspicious Activity Reports

A compliance officer was fined, and faces further action, for failing to file Suspicious Activity Reports.  The SEC asserts that the respondent observed significant red flags indicating illegal activity including high trading volume in companies with little business activity.  He also received alerts about suspicious trading activity from the clearing firm.  The SEC faults the respondent for ignoring his own Written Supervisory Procedures by failing to file reports, investigate suspicious trading, or produce a written analysis demonstrating that he had considered filing SARs.  His firm was previously censured and fined.

OUR TAKE:  The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) maintains that a compliance officer is liable for up to $25,000 for every SAR not filed.  It’s not enough to have policies and procedures.  A compliance officer must implement those procedures and monitor and address potential violations.