The Securities and Exchange Commission slapped Merrill Lynch with a $13 million civil penalty over anti-money laundering failures and for not filing suspicious activity reports.
In its late December complaint, the SEC states that from at least 2011 to 2015, Merrill Lynch had anti-money laundering policies and procedures “that were not reasonably designed to account for the additional risk associated with the additional services offered by certain of its retail brokerage accounts.”
During the relevant period, the complaint states, “over $2 trillion in transactions not including the purchase or sale of securities moved through Merrill Lynch brokerage accounts via cash deposits, wires, journal-entry transfers, check writing, ATM withdrawals, cash advances and ACH transfers.”
These transactions, the SEC complaint states, “presented money laundering risks, including, but not limited to, structuring currency deposits and withdrawals to avoid cash transaction reporting obligations and other risks associated with cash-intensive activities, such as laundering the proceeds of illegal activity.”
Merrill also did not apply its Mantas automated transaction monitoring system to certain accounts from approximately 2006 through approximately May 2015.
These accounts included:
- Retirement accounts — about 4.2 million SEP, 403(b), IRA, IRA rollover, Roth IRA and other retirement accounts as of February 2015;
- Managed accounts — about 228,0001 retail brokerage accounts held at Merrill Lynch as of February 2015 under the discretionary management of a Merrill Lynch registered representative or Merrill Lynch-approved outside investment adviser; and
- Securities-based loan accounts — about 421,000 active retail brokerage accounts as of February 2015 that held securities-based loans, and brokerage accounts pledged as security for those loans.
According to the complaint, these accounts “engaged in a significant number of transactions, moving substantial amounts of funds to and from accounts at Merrill Lynch. From 2011 through 2013, managed accounts, securities-based loan accounts, and the accounts pledged to them engaged in approximately 12 million transactions moving approximately $105 billion to and from accounts at Merrill Lynch, via checks, ATM withdrawals, cash deposits, wires and ACH transactions.”
The complaint also cites Merrill for failing to file suspicious activity reports, which broker-dealers are required to file as set out by the Financial Crimes Enforcement Network, or FinCEN.
Merrill Lynch said in a statement that “We continuously work to enhance and strengthen our controls. These matters are from several years ago and all the concerns raised have been fully addressed.”