The Blog Of The Securities Industry Professional Association

Government proves AML and SAR’s are worthless

Why burden brokerage firms?

For years we have questioned why the federal government relies on brokerage firms to do a laundry list of cartwheels and hoop jumping to fight potential terrorism. September 11th 2001 was 17 years ago and every month FINRA and the SEC take dramatic and draconian action against firms for not seeing ‘red flags’ from their customers. 17 years later and countless billions in costs later, we are still waiting for the fruits of this anti terrorism program. There has never been a press conference in which the Treasury, FBI and SEC announce how they have stopped the funding of Hamas or ISIS due to the diligence of FINRA registered firms. Quite frankly, it’s a sham that allows clearing firms to charge excessive amounts of money to clear stock or to transfer a wire. Pre 9-11, a customer wire was $15.00 and a one page form you kept on file. Recently I sent a wire to a customer from Wells Fargo and it was $50.00, took half an hour and I signed as many pages as I did on my 1st mortgage!!

Yesterday it was announced that a U.S. Treasury employee has been arrested on charges that she leaked to BuzzFeed News multiple reports about suspicious financial transactions involving ex-Trump campaign chief Paul Manafort, law-enforcement officials said. This is shocking to say the least when you consider the amount of “secrecy” that a firm must keep when filing a SARs report. When I was CEO at a correspondent clearing firm I DID NOT HAVE ACCESS to the SAR’s file, only our Compliance officer! During a routine SEC audit, the examiner told us in our exit interview that technically, FINRA examiners should not be granted access to these filings. We were stunned to say the least because FINRA always asked for these files when they did an audit. The woman in the case above was not only copying thousands of classified documents and sending them to a lowlife news outlet, but she was also committing identity theft, which has not been added as a charge to our surprise.

The SAR’s report contains enough information to open a line of credit, buy a house, obtain a credit card and more. This begs the question, who is watching over this super secret information at the treasury? In my firm, I wouldn’t even know where to find the SAR’s file nor did I ever view a report, yet this woman can just download on a thumb drive and remove it from a federal office? One of the interesting aspects of this case that is being ignored is the fact that these reports were issued against former Trump aids years ago and the FINCEN group had no problem with the transactions of Gates and Manafort and took no action. Fast forward to 2017 and suddenly these same transactions are crimes against humanity according to Robert Mueller. This once again begs the question: Why bother with SAR’s reporting? It’s really just a political tool to be used by Washington’s warring factions, so why not alleviate the burden on small firms and allow them to go back to doing business, not being crime stoppers.

As we have said in the past, the Patriot Act , AML and many other post 9-11 rules and regulations were knee jerk reactions by GW Bush that have done nothing but put burdens on broker dealers and Americans for the last 17 years. If our government is relying on a broker in Long Island to help fight ISIS, we are all doomed. While some like to point out that we are safer after 9-11, I disagree. We created Home Land Security, but already have an army and FBI that is routinely leaking classified information to everybody. We created TSA so we can stand in lines at airports for 2 hours, but we continue to have incidents at airports on a daily basis. We created the NSA when we already had a CIA and 17 years later their primary objective is to leak political information about Trump. We created ICE even though we had an agency already in place known as INS, but this group was now a division of the newly formed Homeland Security group. If your head is spinning, you are not alone. The next time somebody refers to GW Bush as a conservative,slap them in the back of the head. He was perhaps the most government expanding President since Lyndon Johnson and FDR!

All brokerage firms are required by FINRA to have in place a privacy policy and ensure customer’s information is protected. Based on yesterday’s arrest, broker dealers should only provide vague information in a SAR report and not include the full name, the social security number, address or the bank information of its customers. The SAR report should be just a very generic report that states: Customer John Doe, deposited 2 million shares of a thinly traded stock, sold it over 10 days and requested a wire to a foreign bank, please contact us if you would like more information but be advised you must review this information in our offices and may not make copies.

What do you think? Your comments are appreciated

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October 18th, 2018



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