← Broker database 2023-07-11
Merrill Lynch Fined $6 Million for Suspicious Activity Reporting Failures
According to FINRA, Merrill Lynch, Pierce, Fenner & Smith Incorporated was censured and fined $6,000,000 for applying an incorrect Suspicious Activity Report (SAR) filing threshold for over a decade.
The firm applied the $25,000 monetary threshold applicable to national banks rather than the $5,000 threshold applicable to broker-dealers when determining whether to file certain categories of SARs. This error occurred after Merrill Lynch merged with a bank, at which time the bank assumed responsibility for investigating suspicious activity and filing SARs. The firm's procedures only referenced the threshold applicable to banks and failed to identify the threshold applicable to broker-dealers.
As a result, suspicious activity that went unreported included unauthorized debit card withdrawals, forged or altered checks, account intrusions, identity theft, and phone or internet scams. FINRA found that the firm failed to establish and implement policies and procedures reasonably designed to detect and cause the reporting of suspicious transactions.
Investors should understand that broker-dealers are required to maintain robust anti-money laundering (AML) compliance programs. When firms fail to properly report suspicious activity, they not only violate regulatory requirements but also potentially allow fraudulent activity to continue unchecked. This case demonstrates the importance of firms maintaining proper procedures that account for the specific regulatory requirements applicable to broker-dealers, rather than relying on procedures designed for other types of financial institutions.