Apr 29, 2021 | News

FINRA Exam to Focus on SAR Filings of Broker Dealers

FINRA has provided advice for Broker Dealers to Fight Fraud.

Given internet globalization and increase in technology and data, criminals and fraudsters are operating against firms and their clients at a much larger scale than ever before.  Therefore, FINRA’s regulatory group exams will be focusing on the filing of SARs (Suspicious Activity Reports) along with the governance of technology, communictaions about digital assets, and Regulation Best Interest.  According to Greg Ruppert, head of National Cause and Financial Crimes Detection Programs at FINRA, “the amounts of money involved might be below the current thresholds, depending on what your firm allows for the trading.”

One way Broker Dealers can make their SARs more effective is to tie the activity together when there is more than one incident that involves the same suspected bad actor.  Bundling SARS may prove to be more impactful even if it’s just an attempt at fraud.  Making sure that the AML or Compliance teams are getting the information from their operations is imperative  for the efforts of law enforcement to help identify rings or organized activity.

In some instances, fraud incidents are no fault of the firm, but it could stem from client behaviors that are leading to that fraud.  Why are Broker Dealers and their Clients such a target, “Because that’s where the money is” adds Ruppert.  Broker Dealers have become more attractive targets because they are no longer just buying and selling securities as in the past.  There has been a steady increase in the number of products and services Broker Dealer firms are offering and there is substantial connectivity to third party services.  Clients can now connect brokerage accounts to banking, PayPal, Square, and Venmo, for example.  Monitoring securities purchases and looking for red flags in how monies are coming in and going out is regulatory requirement.  An example of a red flag would be clients logging in from a foreign country and at odd hours of the night.

Make sure your Broker Dealer firm follows all AML regulatory procedures and files regular SARs no matter how small.

If you need assistance with your Broker Dealer annual AML, please