SEC charges broker-dealer for failure to file Suspicious Activity Reports
The Securities and Exchange Commission (SEC) has announced the imposition of charges against broker-dealer Archipelago Trading Services Inc. (ATSI) stemming from ATSI’s failure to file essential Suspicious Activity Reports (SARs) for numerous suspicious financial transactions spanning the period between August 2012 and September 2020. The omission of these reports, which are crucial for monitoring and detecting potential illicit activities, has resulted in a fine of $1.5 million issued to ATSI..
ATSI operates an alternative trading system (ATS) named Global OTC, used for the trading of OTC equity securities. This platform plays a significant role in facilitating trades involving microcap and penny stocks. Microcap and penny stock securities tend to be high-risk securities because they typically lack public information, have no minimum listing standards, lack liquidity, and have high volatility
Despite the daily execution of thousands of transactions involving these high-risk securities on Global OTC, ATSI failed to establish an anti-money laundering surveillance program until September 2020. This deficiency left the company ill-equipped to identify and investigate red flags associated with suspicious trading activity. Consequently, the SEC’s order found that ATSI neglected to file at least 461 SARs, most of which pertained to microcap or penny stock securities.
MAS issues AML/CFT guidance
The Monetary Authority of Singapore (MAS) has published a new information paper on strengthening AML/CFT controls and practices. The paper sets out typologies and case studies observed by MAS during their inspections of FIs, and their supervisory expectations to ensure robust anti-money laundering and countering the financing of terrorism (AML/CFT) controls.
The paper includes a number of useful case studies and concludes with a useful reminder of action points for financial institutions (FIs):
- FIs must not be complacent, but remain vigilant and should continue to take steps to enhance their risk awareness and AML/CFT controls.
- FIs should assess the effectiveness of their controls against MAS’ inspection findings and guidance provided heer. Appropriate steps should be taken to address any gaps.
- FIs should ensure that staff keep up to date on risks and typologies on misuse of legal persons/arrangements and complex structures as they evolve, in order to detect and escalate risk concerns for prompt mitigation.
- Particular attention should be placed on ensuring robust understanding of customers’ SOW and transactions where risk concerns are observed. When relevant, STRs should be filed promptly and without delay.
- Senior management should provide close oversight to ensure effectiveness of controls in place and maintain high risk management standards.
- FIs are encouraged to review their existing controls and assess whether there is scope to incorporate the use of DA to enhance its risk detection capabilities and deliver the effective outcomes illustrated in this paper.
Latest SARs newsletter from UK’s FIU
The National Crime Agency, the financial intelligence unit for the UK, has published its latest SARs Reporter Booklet for August.
The newsletter provides useful case studies around fraud and money laundering and a reminder of the various SAR glossary codes required when submitting a suspicious activity report.
A selected summary of key developments for regulated financial institutions
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