Merrill Lynch, a broker-dealer, has agreed to pay a combined fine of $12 million to regulatory authorities for failing to submit approximately 1,500 suspicious activity reports (SARs) over more than a decade. According to U.S. anti-money laundering (AML) regulations, broker-dealers are obligated to file SARs to the Financial Crimes Enforcement Network (FinCEN) on transactions exceeding $5,000 that could indicate criminal activities like tax evasion. This assists U.S. government agencies in identifying and preventing money laundering.
During 2009 to late 2019, Merrill Lynch’s parent company, which was implementing the broker-dealer’s AML program following Bank of America’s acquisition of Merrill during the 2008-09 financial crisis, incorrectly employed a $25,000 threshold instead of the required $5,000 for reporting SARs. Merrill Lynch has agreed to pay $6 million to settle charges brought by the Securities and Exchange Commission (SEC).
In a parallel action, the Financial Industry Regulatory Authority (FINRA), the self-regulatory organization for the brokerage industry, also fined Merrill Lynch $6 million for prolonged AML program deficiencies. FINRA asserted that Merrill failed to adhere to the appropriate threshold for SARs reporting for over 10 years and omitted the filing of nearly 1,500 SARs.
The compliance of broker-dealers with SARs filing has been a primary focus of examinations conducted by both the SEC and FINRA in recent times. Regulatory bodies have underscored the significance of proper SARs monitoring and reporting in broker-dealers’ AML programs and offered guidance to enhance compliance.
By FCCT Editorial Team
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