The Division of Examinations conducts thorough assessments of broker-dealers (referred to as firms or registrants) to evaluate their compliance with anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements. In 2021, the Division published a Risk Alert that addressed compliance issues related to the monitoring and reporting of suspicious activities within broker-dealers’ AML programs. This underscored the paramount importance of AML compliance for both the Commission and law enforcement in combatting misconduct that could jeopardize the safety of investor assets and the integrity of the financial market. The current Risk Alert presents examination findings concerning other crucial AML obligations, encompassing independent testing of firms’ AML programs, personnel training, customer identification, and the verification of beneficial owners.

Before delving into these specific findings, the Division wishes to highlight two general observations concerning broker-dealer AML programs. Firstly, certain entities appeared to not allocate sufficient resources, including staffing, towards AML compliance, despite the scope of their business operations and the associated risks. This challenge might be further intensified by the ongoing surge in sanctions imposed by the Office of Foreign Assets Control (OFAC) against individuals and entities. Secondly, the staff observed that the effectiveness of policies, procedures, and internal controls was compromised when firms failed to consistently implement these measures. With the aim of assisting registrants in reviewing and bolstering their AML programs, EXAMS underscores the importance for registrants to uphold their obligations in accordance with all applicable AML and financial sanctions laws and regulations.