SEC Cracks Down on Anti-Money Laundering Enforcement

Strategic Insights -

The Securities and Exchange Commission (SEC) has issued two recent enforcement actions that highlight its renewed focus on policing anti-money laundering (AML) compliance. The cases demonstrate the SEC's willingness to penalize individuals and entities that contribute to or cause AML failures, marking a significant shift in its approach to enforcement.

Key Takeaways:

  • The SEC charged an individual registered representative with failing to escalate red flags of suspicious activity, resulting in a $20,000 civil penalty.
  • A registered investment adviser was charged with causing mutual funds to fail to adopt a reasonably designed AML program, leading to a $6 million penalty.
  • The cases reflect a renewed and aggressive focus on AML compliance by the SEC and its Division of Enforcement.
  • The SEC is now bringing charges against a broad universe of respondents who cause AML failures, not just the primary responsible parties.
  • The Division of Examinations has emphasized the importance of AML program compliance, citing insufficient resources and inconsistent implementation as common issues.
  • Broker-dealers have long known they are responsible for establishing and implementing reasonably designed AML programs, but recent enforcement actions remind other industry participants that they too risk being found liable if they cause an AML failure.

Statistics:

  • The SEC issued a civil penalty of $20,000 against an individual registered representative for failing to escalate red flags of suspicious activity.
  • The registered investment adviser was charged with causing mutual funds to fail to adopt a reasonably designed AML program, resulting in a $6 million penalty.
  • 97% of registrants did not appear to devote sufficient resources, including staffing, to AML compliance given the volume and risks to their businesses. (Source: SEC Division of Examinations' 2023 Risk Alert)
  • 61% of the Division of Examinations' 2023 Targets for examinations included assessing whether firms had established appropriate customer identification programs and satisfactory SAR filing obligations. (Source: SEC 2023 Examination Priorities)

Sources:

1. The Securities and Exchange Commission, SEC Charges Registered Representative with Causing Brokerage Firm's Failure to Timely File a SAR Concerning Suspicious Wires Surrounding an Acquisition Announcement, WWW.SEC.GOV, https://www.sec.gov/enforce/34-98418-s.

2. The Securities and Exchange Commission, Deutsche Bank Subsidiary DWS to Pay $25 Million for Anti-Money Laundering Violations and Misstatements Regarding ESG Investments, WWW.SEC.GOV, https://www.sec.gov/news/press-release/2023-194.

3. The Risk Alert is available here: https://www.sec.gov/files/risk-alert-aml-compliance-examinations-bd-073123.pdf.

4. The 2023 Examination Priorities are available here: https://www.sec.gov/files/2023-exam-priorities.pdf