SEC Demands Stronger Anti-money Laundering Policies from Brokerage Firms

<p>The US securities regulator has issued a
warning to broker-dealers urging them to strengthen their anti-money laundering
policies and procedures, including conducting due diligence when opening new
accounts for customers.</p><p>Additionally, the <a href="https://www.financemagnates.com/tag/us-sec/" target="_blank">Securities and Exchange Commission (SEC)</a> pointed
out that some broker-dealers were not devoting enough resources, including
staff, to their anti-money laundering <a href="https://www.financemagnates.com/terms/c/compliance/">compliance</a> programs. The regulator emphasized that
broker-dealers should flag suspicious transactions and conduct due diligence.</p><p>SEC's Guidelines for Broker-Dealers</p><p>"Broker-dealers are required to implement
and maintain a written anti-money laundering program, approved in writing by
senior management, that includes, at minimum, policies, procedures, and
internal controls reasonably designed to achieve compliance with the Bank
Secrecy Act (BSA) and the implementing regulations," the SEC <a href="https://www.sec.gov/files/risk-alert-aml-compliance-examinations-bd-073123.pdf" target="_blank">explained</a>.</p><p>Additionally, the regulator, which did not
name any particular company, also discovered that some broker-dealers did not test
their anti-<a href="https://www.financemagnates.com/terms/m/money-laundering/">money laundering</a> controls in a timely manner and did not conduct a
comprehensive test of their programs. The SEC also found out that some
broker-dealers have not updated their AML programs according to the latest changes.</p><p>Nearly a month ago, the regulator <a href="https://www.financemagnates.com/forex/sec-seeks-changes-to-protect-customers-against-broker-dealers-failure/" target="_blank">introduced new changes</a> intended
to protect consumers in the securities trading industry. Among the changes, the
SEC wants broker-dealers to separate customers' funds from their own and to
calculate the cash owed to customers and other broker-dealers daily instead of
weekly.</p><p>Protecting Consumers</p><p>According to a report by <a href="https://www.financemagnates.com/forex/sec-seeks-changes-to-protect-customers-against-broker-dealers-failure/" target="_blank">Finance Magnates</a>, the
regulator wants all the broker-dealers with net cash of at least USD $250 million to
calculate the amount of money they owe to customers daily and to deposit the
cash in reserves. Thus, the watchdog expects to protect the interest of
consumers should a broker-dealer fail.</p><p>The latest warning arrived amid heightened
scrutiny against broker-dealers operating in the US. In April, the regulator
issued similar warnings highlighting the need for broker-dealers to implement
proper policies on safeguarding customer records and information at their
branch offices.</p><p>"While many of the (broker-dealers) have
implemented written policies and procedures at their main office, some firms
did not adopt or implement written policies and procedures that address
safeguards for their branch offices despite the existence of the same or
similar risks," the SEC <a href="https://www.sec.gov/files/risk-alert-safeguarding-info-branch-offices-042623.pdf?_cldee=jE023XzAZvzdqplQw9fsKtTBr0cbQYnI3Hx0BVe-oREIWJJzLyWfUVlIPrZ3XfOi&amp;recipientid=contact-c3613161de89ec1193b0002248296ef7-63505b6687a740938d4c1e3cfadcb133&amp;esid=4c98cbb7-d6e5-ed11-a7c7-002248218d67" target="_blank">said</a>.</p>

This article was written by Jared Kirui at www.financemagnates.com.