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Industry Spotlight > Broker Dealers

SEC Probing BDs’ Low Number of Suspicious Activity Reports

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Securities and Exchange Commission Enforcement Chief Andrew Ceresney told broker-dealers Wednesday that compliance with the Bank Secrecy Act “is not optional,” and that a BD’s failure to file a required suspicious activity report (SAR) “is, by itself, a basis for enforcement action.”

Speaking at the Securities Industry and Financial Markets Association’s 2015 Anti-Money Laundering & Financial Crimes Conference in New York, Ceresney said that of the approximately 4,800 broker-dealers in the U.S., all of which are required to file SARs with the SEC when necessary, the number of firms that file “zero SARs or one SAR per year [is] disturbingly large.”

Said Ceresney: “I can’t say that each firm necessarily failed to file SARs that it should have filed. But these findings are troubling, and suggest a need for further investigation.”

Ceresney said the Enforcement Division’s Broker-Dealer Task Force — which is developing broker-dealer initiatives that can be implemented Division-wide — will now also pursue “standalone BSA violations to send a clear message to the industry about the need for compliance.” 

More than half of all the SARs filed by the securities industry last year were filed “by fewer firms than are represented in this room,” Ceresney said. “Recall, that’s out of a population of between four and five thousand. Judging by the numbers, I find it hard to believe that the industry as a whole is fulfilling its obligations.”

The nature of the BD industry, he said, “and the sheer volume of transactions executed each year suggest to me that this number is far too low.”

Candice Basso, spokeswoman for the Treasury Department’s Financial Crimes Enforcement Network, told ThinkAdvisor the same day that FinCEN continues to work with the SEC to draft a regulatory proposal on AML programs and suspicious activity reporting for investment advisors. Basso did not have a timeline for when such a proposal would be released.

The Office of Market Intelligence (OMI) within the SEC’s Enforcement Division reviews all tips, complaints and referrals, and within OMI is the Bank Secrecy Act Review Group. “In the course of a year, this group reviews between 27,000 and 30,000 SARs. If a SAR is filed by a broker-dealer, that group will see it, along with any other SARs filed by any other type of financial institution about any entity, person or transaction within our jurisdiction,” Ceresney said.

He pointed to the SEC’s recent case against Oppenheimer & Co., brought in late January with FinCEN, which levied the largest civil money penalty ever against a broker-dealer for AML failures. 

The sanctions imposed on Oppenheimer, which included $20 million in monetary relief, “reflect the magnitude of Oppenheimer’s regulatory failures,” he said. Taken together, he said, the Wedbush Securities and Oppenheimer AML cases “demonstrate that the SEC is fully committed to addressing lax AML compliance programs at broker-dealers through strong enforcement action.”

— Check out FINRA’s 5 Biggest Fine Categories in 2014 on ThinkAdvisor.


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