SEC Boosts AML BSA Enforcement with SARs Action

A piece of news about Vincente Martinez leaving the SEC alerted us to the first SEC enforcement action of the Bank Secrecy Act against a broker-dealer solely for failing to file suspicious activity reports (SARs) on time.

Martinez was the original Director of the CFTC Whistleblower Office before returning to the SEC in 2013. Martinez served as the Chief of the Office of Market Intelligence since 2013. OMI is located within the enforcement division and initially reviews tips from SEC whistleblowers. Victor J. Valdez will be the Acting Chief of OMI after Martinez leaves next month.

OMI also works with the Broker-Dealer Task Force to identify potential firms failing to file suspicious activity reports (SARs). It was a news article by Compliance Week on Martinez and OMI that alerted us to the $300,000 settlement of an enforcement action for failing to file SARs when appropriate.

Although the penalty wouldn’t be enough to trigger a whistleblower award, where there is a $1 million minimum in monetary sanctions, it is evidence that money laundering reporting is increasingly on the SEC’s radar.

Past sanctions have involved the enforcement of other federal securities laws in addition to fines for anti-money laundering (AML) violations. For example, in January 2015, the SEC and the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) fined Oppenheimer & Co. a total of $20 million, with half the results of failure to file SARs.

New York has also stepped up its Anti-Money Laundering regulation recently, as the New York Department of Financial Services has issued rules in this area effective January 1, 2017. If NY was also to pass the previously considered bank whistleblower reward legislation, this could be a big boon to whistleblowers working in compliance at New York banks.

Back in 2013, a few U.S. Representatives introduced into Congress a bill to provide greater rewards to money laundering whistleblowers, called the Holding Individuals Accountable and Deterring Money Laundering Act. The bill was also introduced into the 114th Congress (2015-2016) by Representative Maxine Waters of California. The bill is modeled after the SEC whistleblower provisions in the Dodd-Frank Act, providing for rewards of between 10 and 30 percent of the monetary sanctions recovered.

FinCEN is only currently authorized to pay up to $150,000 to whistleblowers for information about violations of the Bank Secrecy Act.

We’ll put this legislation on our radar to see if it moves through Congress to increase the rewards offered.  To speak to our whistleblower attorneys about this information or for an evaluation of a potential submission, please call 1-800-590-4116.

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