The SEC Wants More Suspicious Activity Reports!

SEC Headquarters in Washington D.C.

According to Andrew Ceresney, director of the SEC Division of Enforcement, the SEC is considering enforcement cases against brokerages that fail to report suspicious activity.

According to the SEC, many U.S. brokerages are simply failing to report possible money laundering.

Citing statistics of that put the average number of reports at just 5 reports on average per brokerage firm per year, it would seem the SEC has a point.

Indeed, it is hard to believe that with billions of individual securities transactions conducted amongst millions of counter-parties across the 4,800 registered brokerages in the United States, that just 18,000 to 25,000 total suspicious activity reports would be filed per year.

Ceresney confirms that the SEC is still trying to figure out why the firms are not filing SARs.  Could it be that their KYC/AML tools are not up to the task?  Or perhaps they simply don’t want to be bothered with the time and effort required to interact with the regulator in filing them… either way, when the SEC comes knocking, Ceresney made it clear that the action “will send a strong and clear message”.

Read more at Many U.S. brokerages fail to report possible money laundering: SEC official.

Anti-money laundering officers urged to be vigilant over Ukrainian cash movements

Recently, FATF regime governments have been urging caution with respect to Ukrainian assets.  At this sensitive time, there is a real risk of expropriation and plundering of assets that should remain within the Ukraine.  From Reuters:

Money laundering reporting officers must balance extra vigilance about suspicious Ukrainian cash entering or leaving the UK following the ousting of President Victor Yanukovich but they cannot afford to jump to conclusions, officials said. Serious civil unrest has followed in recent days with scores of people killed.

Campaign group Transparency International (TI) issued a risk alert on Ukraine saying it believed corrupt assets might be laundered through or into the UK following the devastating upheaval in the country. It called on the government, money laundering reporting officers (MLROs), law and accountancy firms plus luxury estate agents to be on the lookout for dirty funds emerging from the country. TI said lessons needed to be learnt from the Arab Spring where, it said, there had been a slow international response to freezing assets.

The article goes on to discuss the potential for capital flight and how Money Laundering Reporting Officers (MLROs) should vigilantly report and suspicious activity to the authorities and that the government must respond to suspicious activity reports (SARs) without any delay.

What is not mentioned in the article is that financial institutions should know their existing customers and now is a good time to review any Ukrainian client accounts already in your institution.  This should be done with a specific focus on their political exposure and the source of funds of any significant accounts, especially in comparison to the means of the account holder.

A quick look in KYC3.com reveals many Ukrainian businesses using corporate structures in western jurisdictions such as the United States and Luxembourg.  These should be of particular interests as these offshore trading companies are often the vehicle of choice for capital flight from troubled regions.

A quick look at Ukrainian company links in Western jurisdictions using kyc3.com

As sanctions are being considered against some Ukrainian and Russian officials, it would not be foolish to get a handle on your current accounts so that compliance can be assured quickly and efficiently in the event that sanctions materialize.

For the full Reuters article, please read here.