Merrill Lynch to Pay $12 Million for Failing to File Hundreds of Suspicious Activity Reports

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Broker-dealer Merrill Lynch has agreed to pay a total of $12 million in fines to regulators for failing to file about 1,500 suspicious activity reports over more than a decade.

Under U.S. anti-money-laundering rules, broker-dealers like Merrill Lynch are required to file suspicious activity reports to the Financial Crimes Enforcement Network on transactions above $5,000 when they might signal criminal activities, such as tax evasion, to assist U.S. government agencies in detecting and preventing money laundering.

Merrill Lynch’s parent company, which was implementing the broker-dealer’s anti-money-laundering program following Bank of America’s acquisition of Merrill during the 2008-09 financial crisis, used a $25,000 threshold, instead of the $5,000 one, for reporting SARs between 2009 and late 2019, the Securities and Exchange Commission said Tuesday.

Merrill agreed to pay $6 million to settle the SEC charges.

In a parallel enforcement action, the Financial Industry Regulatory Authority, the brokerage industry’s self-regulator, fined Merrill another $6 million for longstanding anti-money-laundering program failures, the regulator said Tuesday. Finra alleged Merrill failed to apply the right threshold for SARs reporting for more than 10 years and failed to file nearly 1,500 SARs to regulators.

“Following an internal review, we reported this matter to regulators and have enhanced our process and training regarding these filings,” a spokeswoman for Merrill Lynch said in an email.

Bank of America, in a separate enforcement action Tuesday, was ordered to pay a $250 million penalty for opening credit-card accounts in customers’ names without their consent and double-charging fees, regulators said. The Consumer Financial Protection Bureau said the bank opened credit-card accounts without permission from customers using credit reports it obtained illegally.

Broker-dealers’ compliance with filing SARs has been one of the top priorities for examinations by the SEC and Finra in recent years. The SEC’s examination division, in a risk alert published in 2021, called attention to the compliance issues related to SARs monitoring and reporting by broker-dealers and provided guidance in strengthening firms’ anti-money-laundering programs.

Finra, in its 2023 examination findings report, listed the lack of ongoing monitoring and reporting of suspicious transactions as one of the top findings.

Source: Wall Street Journal

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