The SEC can also pay awards to whistleblowers for disclosing a broker-dealer’s failure to file suspicious activity reports, maintain an anti-money laundering compliance program, or establish an adequate customer identification program. In addition, the SEC can take an enforcement action against a mutual fund for a violation of Rule 38a-1, which requires investment companies to adopt and implement written policies and procedures reasonably designed to prevent violations of the federal securities laws by the funds, which includes the Bank Secrecy Act.
Contact the experienced AML whistleblower lawyers at Zuckerman Law for a free, confidential consultation. The law firm’s SEC whistleblower attorneys will work to quickly provide SEC whistleblowers with the highest-quality representation.
Click here or call us today at 202-262-8959.
And in February 2018, U.S. Bancorp/U.S. Bank paid $613 million in fines and forfeitures to settle charges that it failed to maintain adequate safeguards against money laundering. In particular, U.S. Bancorp/U.S. Bank limited the number of transactions its systems would flag as suspicious and processed Western Union transactions for non-customers.
The SEC’s 2024 examination priorities clarify that the SEC continues to focus on AML compliance:
The BSA requires certain financial institutions, including broker-dealers and certain registered investment companies, to establish anti-money laundering (AML) programs that are tailored to address the risks associated with the firm’s location, size, and activities, including the customers they serve, the types of products and services offered, and how those products and services are offered. These programs must, among other things, include policies, procedures, and internal controls reasonably designed to achieve compliance with the BSA and its implementing rules; independent testing; and risk-based procedures to perform customer due diligence (as required by the Customer Due Diligence rule), which includes identifying and verifying the identity of customers and conducting ongoing monitoring to identify and report suspicious transactions. Where appropriate, certain financial institutions must also file Suspicious Activity Reports (SARs) with the Financial Crimes Enforcement Network. SARs can be used to detect and combat market manipulation, insider trading, Ponzi schemes, corruption, money laundering, terrorist financing, and a variety of other illicit activities potentially violative of securities and other laws and regulations.
The Division will continue to focus on AML programs to review whether broker-dealers and certain registered investment companies are: (1) appropriately tailoring their AML program to their business model and associated AML risks; (2) conducting independent testing; (3) establishing an adequate customer identification program, including for beneficial owners of legal entity customers; and (4) meeting their SAR filing obligations.
Examinations of certain registered investment companies will also review policies and procedures for oversight of applicable financial intermediaries. Also, the Division will review whether broker-dealers and advisers are monitoring Office of Foreign Assets Control sanctions and ensuring compliance with such sanctions.
The primary anti-money laundering regulations for brokers or dealers require, among other things, the establishment and implementation of an anti-money laundering program, which includes, at a minimum:
In the event that a broker-dealer identifies a suspicious transaction, the firm is required to file a SAR with the U.S. Treasury Department’s Financial Crimes Enforcement Network (FinCEN). In the SAR’s narrative section, broker-dealers must “[p]rovide a clear, complete and chronological description . . . of the activity, including what is unusual, irregular or suspicious about the transactions(s).” Broker-dealers violate federal securities laws (specifically, Section 17(a) of the Exchange Act and Rule 17a-8) when they:
These violations deprive regulators and law enforcement of important information that could be used to identify potential securities law and money laundering violations.
In a July 2023 Risk Alert, EXAMS staff observed certain weaknesses in OFAC compliance programs, including instances in which entities did not adopt or implement reasonable, risk-based internal controls for
The alert encourages registrants to review and strengthen the policies, procedures, and internal controls of their AML programs to further their compliance with federal AML rules and regulations, and to monitor for amendments, pursuant to
the AMLA and the Corporate Transparency Act.
On June 5, 2017, the SEC charged brokerage firm Alpine Securities Corporation (Alpine) with securities law violations related to its ineffective anti-money laundering program. According to the SEC’s complaint, Alpine failed to adequately file suspicious activity reports (SARs) for at least 1,950 stock transactions that the firm flagged as suspicious. The SEC found that Alpine’s “records contained information reflecting material red flags of money laundering, securities fraud, or other illicit financial activities relating to its customers and their transactions,” and that Alpine “routinely and systematically failed to identify and report suspicious activity in its SAR filings.”
The SEC charged Alpine with thousands of violations of Section 17(a) of the Exchange Act and Rule 17a-8, and sought an order requiring Alpine to pay civil money penalties pursuant to Section 21(d) of the Exchange Act, which provides for penalties ranging from $5,000 to $500,000 for each violation The SEC’s complaint reveals that the SEC also charged many of Alpine’s customers with federal securities laws violations, including violations relating to transactions that cleared through Alpine.
The SEC Whistleblower Program has enabled the SEC to uncover significant investment fraud schemes and halt ongoing fraud. The SEC has paid more than $1.8 billion in awards to whistleblowers for providing information that led to successful enforcement actions.
The experienced AML whistleblower lawyers at Zuckerman Law represent whistleblowers worldwide before the SEC under the Dodd-Frank SEC Whistleblower Program. The firm has a licensed Certified Public Accountant and Certified Fraud Examiner on staff to enhance its ability to investigate and disclose complex financial fraud to the SEC.
Firm Principal Jason Zuckerman has been named by Washingtonian Magazine as a “Top Whistleblower Lawyer” and the firm has been ranked by U.S. News as a Tier 1 Firm in Labor & Employment Litigation.
Leading whistleblower law firm Zuckerman Law has substantial experience investigating securities fraud schemes and preparing effective submissions to the SEC concerning a wide range of federal securities violations, including:
For more information about the SEC Whistleblower Program, download our free ebook SEC Whistleblower Program: Tips from SEC Whistleblower Attorneys to Maximize an SEC Whistleblower Award and see the following resources:
In 2020, the SEC announced that “Anti-Money Laundering” was on the agency’s List of Examination Priorities. The SEC’s examination priorities “reflect certain practices, products, and services that [SEC’s Office of Compliance Inspections and Examinations] perceives to present potentially heightened risk to investors and/or the integrity of the U.S. capital markets.” In the priority list, the SEC clarifies that it will continue to scrutinize broker-dealers’ anti-money laundering programs by:
In 2016, the SEC announced that it would share more of its oversight responsibilities of the broker-dealer industry with the Financial Industry Regulatory Authority (FINRA). Since 2017, and in lockstep with the SEC, FINRA included “Anti-Money Laundering and Suspicious Activity Monitoring” on its 2020 Annual Regulatory and Examination Priorities Letter. Both the SEC and FINRA have increased enforcement actions against broker-dealers for anti-money laundering program violations.
The Bank Secrecy Act (“BSA”), and implementing regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) require that broker-dealers file SARs with FinCEN to report a transaction (or a pattern of transactions of which the transaction is a part) conducted or attempted by, at, or through the broker-dealer involving or aggregating to at least
$5,000 that the broker-dealer knows, suspects, or has reason to suspect: (1) involves funds derived from illegal activity or is conducted to disguise funds derived from illegal activities; (2) is designed to evade any requirement of the BSA; (3) has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts; or (4) involves use of the broker-dealer to facilitate criminal activity. Broker-dealers are required to file the SAR 30 calendar days after the date of the initial detection of facts that may constitute a basis for filing a SAR under the SAR Rule. 31 C.F.R. § 1023.320(b)(3). In cases where the broker-dealer cannot identify a suspect, it must file the SAR within 60 days of the initial detection of facts that may constitute a basis for filing a SAR.
The Bank Secrecy Act (“BSA”), and implementing regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”), require that broker-dealers file SARs with FinCEN to report a transaction (or a pattern of transactions of which the transaction is a part) conducted or attempted by, at, or through the broker-dealer involving or aggregating to at least $5,000 that the broker-dealer knows, suspects, or has reason to suspect: (1) involves funds derived from illegal activity or is conducted to disguise funds derived from illegal activities; (2) is designed to evade any requirement of the BSA; (3) has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the broker-dealer knows of no reasonable explanation for the transaction after examining the available facts; or (4) involves use of the broker-dealer to facilitate criminal activity. 31 C.F.R. § 1023.320(a)(2) (the “SAR Rule”). Broker-dealers are required to file the SAR 30 calendar days after the date of the initial detection of facts that may constitute a basis for filing a SAR under the SAR Rule. 31 C.F.R. § 1023.320(b)(3). In cases where the broker-dealer cannot identify a suspect, it must file the SAR within 60 days of the initial detection of facts that may constitute a basis for filing a SAR.
Id.
Exchange Act Rule 17a-8 requires broker-dealers registered with the Commission to comply with the reporting, record-keeping, and record retention requirements of the BSA. The failure to timely file a SAR as required by the SAR Rule is a violation of Section 17(a) of the Exchange Act.
Whistleblower Outside U.S. Recovers Record SEC Whistleblower Award A Law360 article titled SEC Welcomes Foreign…
Dos And Dont's For Lucrative SEC Whistleblower Tips A Law360 article titled Dos And Dont's…
A Bloomberg BNA article titled SEC Whistle-Blower Awards: No Guarantees quotes SEC whistleblower lawyer Dallas Hammer’s insights about…
SEC Whistleblower Law Firm's FAQs About SEC Whistleblower Program Based on our experience successfully representing…
