FINRA Sanctions Firm for Applying Wrong SAR Threshold

A firm settled FINRA charges for failing to apply the correct suspicious activity report ("SAR") filing threshold.

According to the AWC, broker-dealers are required to file SARs for suspicious transactions of $5,000 or more under certain circumstances, while national banks must apply a $25,000 threshold in cases where no suspect can be identified and the activity does not involve insider abuse, potential money laundering, or Bank Secrecy Act violations. FINRA found that over a three-year period, the firm applied the $25,000 threshold applicable to banks instead of the $5,000 threshold for broker-dealers. FINRA stated that as a result, the firm failed to file 42 SARs related to suspicious activity, including account intrusions, identity theft, and internet scams.

FINRA determined that the issue arose after responsibility for certain SAR filings shifted within the parent company’s centralized compliance structure.

As a result, FINRA concluded the firm violated FINRA Rules 2010 ("Standards of Commercial Honor and Principles of Trade") and 3310 ("Anti-Money Laundering Compliance Program").

To settle the charges, the firm agreed to (i) a censure and (ii) a $500,000 fine. "In determining the appropriate sanctions," FINRA said it took into consideration that the firm undertook remedial measures, including a six-year lookback review, retroactive filing of 42 SARs, amendments to written procedures, enhanced employee training, and prompt self-reporting to FINRA.