When criminals receive money from an illegal transaction they often move that “dirty” money into the financial system, either through depositing the illegal gains into a bank or credit union or investing the money with an investment firm or through a number of other means like purchasing assets. The term “money laundering” is commonly used to describe this illegal activity which is often associated with organized crime and terrorism financing.
The United States Bank Secrecy Act (BSA) requires that financial institutions assist in helping to detect and prevent money laundering by keeping records of cash purchases of negotiable instruments, filing reports of cash transactions exceeding certain limits and by reporting suspicious activity that might signify money laundering, tax evasion, or other criminal activities.1
A Suspicious Activity Report (SAR) is the instrument that is used by financial institutions to report suspicious transactions or attempted transactions. This report is filed with the Financial Crimes Enforcement Network (FinCEN). This standardized reporting assists law enforcement agencies in discovering and prosecuting money laundering, criminal financial schemes and other illegal endeavors as well as to spot trends and patterns which may indicate newly emerging criminal activities and enterprices.2 Any employee within a financial institution can file a SAR and most financial institutions train their employees on how to spot suspicious activity. SARs can also be filed by law enforcement, public safety workers, city or state officials, business owners and even the general public.
In July, both the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), in separate actions, charged Merrill Lynch, Pierce, Fenner & Smith Inc. and its parent company, BAC North America Holding Co., for failing to file Suspicious Activity Reports (SARs) as required by the Bank Secrecy Act. FINRA alleged that Merrill Lynch failed to establish and implement policies, procedures and internal controls reasonably designed to cause the filing of nearly 1,500 SARs during a 10-year period from just after the company’s merger with Bank of America in January 2009 to November 2019.3
The SEC alleged that when the merger occurred, BAC North America Holding Co. assumed responsibility for creating and implementing Merrill Lynch’s SAR policies and procedures for filling Merrill Lynch’s SARs but that BAC incorrectly used a $25,000 threshold instead of the required $5,000 threshold for reporting suspicious transactions or attempted transactions.4 BAC’s Fraud Investigations Group failed to file SAR involving Merrill customers who were victims of unauthorized debit card withdrawals, forged or altered checks, account intrusions, identity theft, and/or phone or internet scams.5
Merrill Lynch and BAC neither admitted nor denied the allegations by FINRA and the SEC but did agreed to pay a total of $12 million ($6 million per organization) in fines to settle the charges brought by each organization.
Take Action
Should you have concerns about potential stockbroker misconduct or negligence leading to investment losses, reach out to our reputable Securities Law Firm in the Detroit area. Our team is well-equipped to conduct a comprehensive assessment of your portfolio and account activity. We possess specialized expertise in filing claims to seek recovery for losses attributed to the actions of broker-dealers, financial advisory firms, stockbrokers, or investment advisors.
Take charge of your investor rights by securing a Free Consultation with our seasoned securities attorneys. Safeguard your financial interests by seeking guidance from professionals who are dedicated to protecting your investments and ensuring fair treatment within the financial markets.
____________________________
1 The Bank Secrecy Act
Link: https://www.fincen.gov/resources/statutes-and-regulations/bank-secrecy-act
2 What is a Suspicious Activity Report?
Link: https://legal.thomsonreuters.com/en/insights/articles/what-is-a-suspicious-activity-report
3 FINRA Fines Merrill Lynch $6 Million for Longstanding AML Program Failures: Firm Failed to File Nearly 1,200 Suspicious Activity Reports, 7/11/2023
Link: https://www.finra.org/media-center/newsreleases/2023/finra-fines-merrill-lynch-6-million-longstanding-aml-program
4 Press Release: SEC Charges Merrill Lynch and Parent Company for Failing to File Suspicious Activity Reports, 7/11/2023
Link: https://www.sec.gov/news/press-release/2023-128
5 SEC Order: Administrative Proceeding File No. 3-21524, 7/11/2023
Link: https://www.sec.gov/files/litigation/admin/2023/34-97872.pdf