SEC and FINRA fine Merrills $6m for AML failures
Merrill Lynch, Pierce, Fenner & Smith Incorporated and its parent company BAC North America Holding Co. (BACNAH) has been fined $6 million by FINRA for failing to file Suspicious Activity Reports (SARs) for suspicious activities that met or exceeded the $5,000 threshold. Merrill Lynch incorrectly 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 a SAR. As a result, Merrill Lynch failed to file approximately 1,500 SARs from January 2009 to November 2019. The suspicious activities that went unreported included alleged unauthorized debit card withdrawals, forged or altered checks, account intrusions, identity theft, and internet scams.
FINRA issued Regulatory Notice 19-18 to provide guidance to member firms regarding suspicious activity monitoring and reporting obligations. Firms can also review FINRA’s 2023 Exam Findings Report to understand FINRA’s areas of concern related to AML.
Meanwhile the SEC’s order found that Merrill Lynch violated the books and records provisions of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder and that BACNAH caused those violations. Without admitting or denying the SEC’s findings, Merrill Lynch and BACNAH agreed to cease and desist from committing or causing violations of those provisions, and Merrill Lynch also agreed to a censure and the aforementioned $6 million civil penalty.
Bank of America fined $60m for overdraft fees
The Office of the Comptroller of the Currency (OCC) has fined Bank of America $60m for charging customers multiple overdraft and insufficient funds fees for the same transaction.
The OCC found that Bank of America’s practices violated Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices.
In particular, the bank’s policies allowed merchants to resubmit transactions that had been declined due to insufficient funds, and then charged customers an additional fee if the account was still overdrawn.
The OCC said that Bank of America’s disclosures did not clearly explain that multiple fees could result from the same transaction, and that customers had no way of knowing when or if a merchant would resubmit a transaction.
In response to the OCC’s findings, Bank of America has waived, refunded, or agreed to refund tens of millions of dollars to customers who were harmed by its practices.
“Overdraft programs should help, not harm, consumers,” said Acting Comptroller of the Currency Michael J. Hsu. “Today’s action demonstrates the OCC’s commitment to protecting consumers and promoting fairness and trust in banking.”
The OCC’s civil money penalty order is separate from, but coordinated with, a consent order announced today by the Consumer Financial Protection Bureau (CFPB). The CFPB ordered Bank of America to redress customers harmed by its practices.
The penalty sends a clear message to other banks that they cannot continue to exploit consumers with unfair overdraft fees.
Weaknesses still exist, but banks are making AML/TF progress says EBA
The European Banking Authority (EBA) has released the findings from its 2022 review of competent authorities’ efforts to combat money laundering and terrorist financing (ML/TF) risks in the banking sector. The EBA evaluated the approaches of 12 competent authorities from nine Member States.
Overall, the EBA’s findings indicate that supervisors are making headway in the fight against money laundering and terrorist financing. Some competent authorities in the sample have implemented significant changes in recent years, resulting in a generally effective approach to Anti-Money Laundering and Counter Terrorism Financing (AML/CFT) supervision of banks.
Through its ongoing commitment to promoting a comprehensive AML/CFT approach, the EBA has facilitated tangible progress among many competent authorities in addressing ML/TF risks through prudential supervision. Most authorities are also on track to incorporate cooperation and information exchange into their supervisory processes. Nevertheless, the EBA has urged most supervisors in the 2022 sample to intensify their efforts in tackling ML/TF risk in the banking sector.
The report notes that several authorities in the 2022 sample did not utilize their risk assessments effectively to inform their supervisory strategies and inspection plans. The lack of formalized processes and targeted training for AML/CFT and prudential supervisors has sometimes resulted in missed opportunities to intervene at an early stage, before risks materialize. The EBA staff has provided guidance to competent authorities on strengthening their approach.
The findings and recommended actions in the report are applicable to all competent authorities responsible for addressing ML/TF risks in credit and financial institutions across the European Union.
BoE announces stress test results
The Bank of England has announced the latest stress test results for UK banks. The hypothetical scenario is designed to be severe and broad enough to assess the resilience of UK banks to a range of severe adverse shocks. The results suggest that the major UK banks would be resilient to a severe stress scenario that incorporated persistently higher advanced-economy inflation, increasing global interest rates, deep and simultaneous recessions in the UK and global economies with materially higher unemployment, and sharp falls in asset prices
The results also concluded that none of the banks tested is required to strengthen its capital position as a result of the test and that whilst the stress scenario significantly reduces capital positions, the banking system remains well above the risk weighted Common Equity Tier 1 (CET1) capital ratio hurdle rate of 6.9
SFC ban for IPO failing
The Securities and Futures Commission (SFC) has banned Tsang Kwong Fai, a former responsible officer (RO) and sponsor principal of RaffAello Capital Limited (RaffAello), from re-entering the industry for two years for breaching the SFC’s Code of Conduct.
Tsang was the sponsor principal in charge of supervision of the execution of a listing application from 2017 to 2018, for which RaffAello was the sole sponsor.
The SFC found that Tsang failed to discharge his duties as a sponsor principal, RO and member of the senior management of RaffAello, in that he had failed to:
- exercise due skill, care and diligence in handling the listing application;
- diligently supervise his subordinates in carrying out the sponsor work; and
- ensure the maintenance of appropriate standards of conduct and adherence to proper systems, controls and procedures by RaffAello to govern sponsor work.
MAS produce AML guidance
The Monetary Authority of Singapore (MAS) has published a new industry perspective document which provides financial services firms with a foundational framework to further the understanding and management of money laundering, terrorism financing, and sanctions risks arising from customer relationships with nexus to digital assets. The paper:
- presents a high-level overview on the classes of digital assets and proposes risk factors for assessing relevance of digital assets from the AML/CFT perspective;
- identifies the possible types of customer nexus to digital assets such as cryptocurrencies and analyzes the underlying risk profiles; and
- clarifies risk management objectives and assesses incremental risk management capabilities required to manage these associated risks.
A selected summary of key developments for regulated financial institutions
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