Broker-Dealer Settles SEC Charges for SARs Reporting Failures

A broker-dealer settled SEC charges for reporting and suspicious activity report filing failures.

In a Cease and Desist Order, the SEC said the broker-dealer relied on its parent company's bankwide anti-money laundering program, which used transaction monitoring software to evaluate risks to clients. The program established a scoring system with a threshold above which the broker-dealer would be investigated for a possible SAR filing. As a result of the broker-dealer's own internal testing, the SEC found that the broker-dealer knew that the scoring system was inaccurate and that entities with scores below the threshhold should have been subject to further investigation. The SEC said the missed reports involved hundreds of millions of dollars in transactions including structured cash transactions, large round-dollar transfers, transfers tied to high-risk locations, and transactions linked to criminal activity.

The SEC determined that the broker-dealer violated SEA Section 17(a) ("Records and Reports") and Rule 17a-8 ("Financial recordkeeping and reporting of currency and foreign transactions").

To settle the charges, the firm agreed to a cease-and-desist order, a censure, and a $7.5 million civil penalty. The SEC credited the firm for its cooperation and the hiring of a compliance consultant.