By Abigail Howd, Spring 2018 IAC Student Intern
In 1975, Queen asked us all, “Is this real life? Is this just fantasy?” You might ask the same questions hearing all the terms surrounding Anti-Money Laundering (AML) Programs—the Bank Secrecy Act, Suspicious Activity Reports, and Financial Crimes Enforcement Network—to name just a few. It probably sounds like you just started reading a novel about a top-secret government agency instead of a blog post about the SEC, but money laundering is not just fantasy. It happens in real life, and AML Programs help “law enforcement agencies to detect and combat terrorist financing, organized crime, public corruption, and a variety of other fraudulent behavior.” That is why the Office of Compliance Inspections and Examinations’ (OCIE) included AML programs on its examinations priorities list for this year.
Money laundering is “the process of making illegally-gained proceeds (i.e. ‘dirty money’) appear legal (i.e. ‘clean’).” The process involves introducing illegal funds back into the legal financial system with multiple transfers and transactions intended to obscure their source. The Financial Crimes Enforcement Network (FinCEN) is a government entity specifically charged with preventing money laundering and other financial crimes. It collects data from financial institutions and uses the data to track criminal activity. The FinCEN also provides this information to law enforcement officials for their investigations. One of the laws that requires banks and other financial institutions to keep records and report suspicious transactions is the Bank Secrecy Act.
Likewise, the OCIE requires broker-dealers to report all large cash transactions, whether or not the transaction appears suspicious to them. In addition, the broker-dealers must also report any suspicious activity or suspected criminal activity. These reports are called Suspicious Activity Reports. Each firm implements its own AML compliance program based on the specific risks that firm faces. The OCIE will review firm practices to verify their compliance with the AML regulatory obligations. In 2017, the SEC published an AML Source Tool for Broker-Dealers that is a quick guide to the various laws, programs, and resources related to the OCIE’s AML program.