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FINRA, SEC fine Merrill Lynch for anti-money laundering failures

On Behalf of | Jul 24, 2023 | FINRA Compliance

The Financial Industry Regulatory Authority and the Securities and Exchange Commission are penalizing Merrill Lynch, Pierce, Fenner & Smith Inc. for failures in its anti-money laundering efforts.

FINRA said it imposed a fine of $6 million on the company for not having policies and procedures in place to cause the reporting of suspicious transactions as required by the Bank Secrecy Act. The SEC said that Merrill Lynch agreed to pay a $6 million penalty in a separate action regarding the same misconduct.

It was determined that Merrill Lynch failed to apply the correct threshold to report suspicious activities for over 10 years, resulting in a failure to file nearly 1,500 Suspicious Activity Reports (SARs).

“Law enforcement and regulators depend on FINRA member firms to properly report potential fraud and other suspicious activities,” said Christopher J. Kelly, Senior Vice President and Acting Head of FINRA’s Department of Enforcement. “It is therefore essential that member firms comply with their SAR filing obligations. Merrill Lynch failed in this basic responsibility.”

In announcing the fines, FINRA noted that broker-dealers and national banks are required to file SARs for suspected criminal activity that meets certain financial thresholds. Broker-dealers such as Merrill Lynch are required to file a SAR for suspected criminal activity that involves aggregate funds or other assets of $5,000 or more. National banks are required to file SARs for suspected criminal activity of $25,000 or more.

FINRA said that the allegations in this case date back to the 2009 merger between Merrill Lynch and Bank of America. In determining whether to file an SAR, Merrill Lynch incorrectly applied the $25,000 threshold applicable to national banks, rather than the $5,000 that applies to broker-dealers.

As a result, Merrill Lynch failed to file about 1,500 SARs from January 2009 to November 2019, when the firm corrected its mistake. This caused suspicious activities to go unreported, including alleged unauthorized debit card withdrawals, forged or altered checks, account intrusions, identity theft, and internet scams.

Merrill Lynch consented to the entry of FINRA’s findings bud did not admit or deny the allegations.

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