SEC Introduces Pair of AML Compliance Initiatives
August 25, 2008
Mutual funds seeking guidance on anti-money-laundering (AML) compliance can now turn to a reference Web site operated by the Securities and Exchange Commission. The agency also announced earlier this month that it has launched a hotline for emergency AML reports.
Originally created for staff in the SEC's office of compliance inspections and examinations (OCIE), the online tool compiles AML laws and regulatory guidelines and offers links to additional information. A similar service was made available to broker-dealers last year.
"While we initially developed these resources for our own SEC examiners, they are invaluable reference tools for industry compliance staff as well," said OCIE director Lori Richards in a statement, adding that the tool "puts all mutual fund AML requirements in one easy-to-reference location, making it easy for mutual funds to understand their AML compliance obligations."
Securities firms can use the SEC's new phone line when they have filed a suspicious activity report (SAR) that may require immediate attention. Investment banks and brokerages have to file SARs--required of commercial banks and thrifts since the Bank Secrecy Act (BSA) became effective in 1970--under the USA Patriot Act of 2001. In May 2006, the Financial Crimes Enforcement Network (FinCEN), the Treasury Department agency charged with enforcing the BSA and Patriot Act, began requiring that mutual funds file the reports as well.
The reliance on telephone communications for such reporting, particularly in emergency situations, runs counter to the movement toward electronic filing and maintenance of data. However, according to spokesperson John Heine, "the SEC decided on the phone option because it was the most effective and the most efficient." He would not comment on any plans the commission may have for a Web-based alternative.
"Only those SARs that require immediate attention should prompt a phone call to law enforcement, or FinCEN's hotline if it relates to suspected terrorist activity," noted FinCEN spokesperson Steve Hudak. "A phone call is suggested because of the urgency involved."
"If a mutual fund or brokerage suspects that immediate attention could, for example, help catch an inside trader or market manipulator in the act, they can bring attention to their SAR and alert the SEC to the activity," said Hudak, who stressed that all BSA reports must be filed with FinCEN.
The filings are made available to outside investigators, including SAR review teams around the country, after they are processed by the Internal Revenue Service's enterprise computing center in Martinsburg, W. Va. and entered into the BSA database, according to Hudak. "I'm told that moves very quickly," he added.
