August 2006

History and Background

The recent high profile fines levied against a prominent broker-dealer by the Department of Treasury’s Financial Crimes Enforcement Network’s (“FinCEN”) for failing to comply with anti-money laundering (AML) standards was a strong message to all broker-dealers about taking compliance seriously. The grace period for broker-dealers to get AML policies in place, seek rule clarification and guidance and fine-tune programs has ended. Just as the first major fine was inevitable, so, too are future fines and disciplinary actions. As more time passes, it is reasonable to assume that regulators will have a higher expectation that broker-dealer AML programs are strong and well executed – and that penalties will be imposed for anything less. At the end of May, the Securities Exchange Commission (SEC) joined the fray when it issued a cease and desist order against another broker-dealer, for failing to adhere to its own Customer Identification Program policies as required by AML regulations.

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