SEC Examining B-Ds to Ensure Compliance With Existing AML Obligations, Official Says

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By Stephen Joyce

June 18— Broker-dealers that don't appear to file an adequate number of suspicious activity reports—SARs—could find themselves being examined by Securities and Exchange Commission personnel, Kevin Goodman, national associate director of the broker-dealer examination program, in the agency's Office of Compliance Inspections and Examinations, said June 18.

An exam might also be triggered if the reports are not adequately robust, Goodman said at a Securities Industry and Financial Markets Association conference in New York. SEC examiners are particularly focused on clearing firms, to ensure that they consider filing SARs if they identify trading patterns that may indicate fraudulent activity, Goodman said.

Goodman's remarks on firms' meeting their anti-money laundering—AML—obligations were similar to earlier comments by SEC Enforcement Director Andrew Ceresney. In a Feb. 25 speech, he announced that his agency had launched “dozens” of investigations into whether broker-dealers were appropriately filing SARs. 

Broker-dealer record-keeping requirements include recording certain types of large cash transactions and retaining records about wire transfers, as well as scrutinizing activity that may indicate fraud, insider trading and manipulative trading schemes, Goodman said.

‘Cornerstone' of Compliance Plan

While broker-dealers are required to design and implement anti-money laundering programs tailored specifically to their firms, Goodman stressed that those programs should be an integral component of an overall compliance program. Strong AML programs result in stronger overall compliance regimes, he said.

“It goes well beyond activity that implicates drug cartels or terrorist rings,” he said of robust AML programs. “So the big theme here today is AML is not some construct outside of the mainstream compliance program. It's really a cornerstone of that program,” he said.

SEC examiners have also identified several business activities that, while not inherently suspicious or high risk, do present AML compliance concerns, including:

• transactions involving thinly traded or low-value securities;

• customers with direct market access; and

• master-subsidiary account arrangements.


Goodman said the SEC is also scrutinizing asset management accounts at broker-dealers that function more like a traditional bank account than a securities account, where little securities trading occurs compared to lots of money transfers and payment-card use.

“We suspect that some people who want to use banks for money laundering may view broker-dealers as less attuned with these risks when it comes to cash management functions,” Goodman said. “We're looking very closely at that.”

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For text of Goodman's remarks, visit

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