According to Reuters,
) and Merrill Lynch brokerage, a unit of
Bank of America Corp.
) is under the U.S. regulators' investigation over the violation of
anti-money laundering laws. The regulators are scrutinizing whether
the brokerage houses properly conducted identification of their
clients as money laundering issues are on an upswing.
Previously, around 2 years ago, the U.S. Treasury Undersecretary
for Terrorism and Financial Intelligence - David Cohen requested
U.S. regulators to scrutinize financial institutions' diligence in
identifying their proper beneficial owners of accounts. Cohen's
concerns stemmed from increased secret transfer of funds by drug
cartel members and terrorists.
The latest move by the U.S. Securities and Exchange Commission
(SEC) follows the investigations over the brokerage industry under
which brokerage houses are being scrutinized to ascertain whether
they are abiding by anti-money laundering rules. However, if found
guilty, fines or penalties to be charged has not been disclosed by
Based on inaccurate customer information, there is a possibility
that brokerage houses might feed money into the financial system
from drug trafficking and other crimes. Therefore, the SEC examined
Schwab and Merrill Lynch to check if these are involved in such
illegal moves by giving warning signals a miss.
According to the source, the SEC investigation revealed that Schwab
and Merrill Lynch without proper inquiry, accepted shell companies
and individuals with forged addresses as clients. Moreover, some of
the account holders are expected to be related to drug cartels.
With its internal investigation underway, Schwab declined to
comment, but confirms its attention to customers' details. However,
spokesmen for the SEC and Merrill Lynch declined to comment.
Under the Bank Secrecy Act, broker-dealers are intimated for proper
documentation of customers' identification. Notably, in 2008,
), a major U.S. brokerage firm was penalized $1 million by the SEC
for the failure to recognize more than 65,000 secondary account
holders' identities in joint accounts.
It must be mentioned that negligence relating to such critical
rules is unacceptable since these issues can give rise to dire
Recently, it was disclosed by persons familiar with the case that
BNP Paribas SA
) will likely pay nearly $5 billion to the U.S. regulators to
resolve investigations into the money laundering issues raised
BNP Paribas' dealings with sanctioned countries including Sudan,
Iran and Cuba are under probe. The agencies involved in the
investigations are the Federal Bureau of Investigation, offices of
Manhattan U.S. Attorney and Manhattan District Attorney, the
Justice Department's criminal division in Washington, and New
York's Department of Financial Services.
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