SEC Division of Enforcement Director Urges Greater Diligence to Improve AML Compliance (with Lofchie Comment)

SEC Director of the Division of Enforcement Andrew Ceresney delivered remarks about AML compliance practices and the value of Suspicious Activity Reports ("SARs").

Mr. Ceresney stressed that legal and compliance departments must not be kept in "silos" and should be treated as "full partners in the business." In general, he noted, firms that avoid regulatory problems tend to prioritize legal and compliance issues.

Mr. Ceresney identified Suspicious Activity Reports ("SARs") as a critical component of AML compliance and stated that they provide the SEC with the information to "initiate cases, expand existing investigations, and to identify and understand trends and patterns of activity within the industry." He noted, however, that certain firms exhibit a "check-the-box" mentality by filing vague and uniform SARs. Additionally, he stated, some firms do not file any SARs, which he said shows that they do not take their Bank Secrecy Act obligations seriously. According to Mr. Ceresney, the Broker-Dealer Task Force targets firms that do not appear to be "consistently meeting their books and records obligations" under Exchange Act Rule 17a-8 and the Bank Secrecy Act.

Lofchie Comment: Mr. Ceresney stated that the average broker-dealer files approximately 5 SARs a year – a number that he considered to be far too low. The message to firms to increase their SAR numbers was fairly explicit.

See: Mr. Ceresney's Remarks.