The US securities regulator has issued a warning to broker-dealers urging them to strengthen their anti-money laundering policies and procedures, including conducting due diligence when opening new accounts for customers.

Additionally, the Securities and Exchange Commission (SEC) pointed out that some broker-dealers were not devoting enough resources, including staff, to their anti-money laundering compliance Compliance In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a In finance, banking, investing, and insurance compliance refers to following the rules or orders set down by the government regulatory authority, either as providing a service or processing a transaction. Compliance concerning finance would also be a state of being following established guidelines or specifications. This designation can also encompass efforts to ensure that organizations are abiding by both industry regulations and government legislation. Understanding ComplianceCompliance is a Read this Term programs. The regulator emphasized that broker-dealers should flag suspicious transactions and conduct due diligence.

SEC's Guidelines for Broker-Dealers

"Broker-dealers are required to implement and maintain a written anti-money laundering program, approved in writing by senior management, that includes, at minimum, policies, procedures, and internal controls reasonably designed to achieve compliance with the Bank Secrecy Act (BSA) and the implementing regulations," the SEC explained.

Additionally, the regulator, which did not name any particular company, discovered that some broker-dealers did not test their anti-money laundering Money Laundering Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Money laundering is a blanket term to describe the process by which criminals disguise the original ownership and proceeds of criminal conduct by making such proceeds appear to be derived from a legitimate source.Money laundering is an issue that traverses countless industries and sectors, which includes the financial services space. Though criminal money may be successfully laundered without the assistance of the financial sector, billions of dollars’ worth of criminally derived money are laund Read this Term controls in a timely manner and did not conduct a comprehensive test of their programs. The SEC further found out that some broker-dealers have not updated their AML programs according to the latest changes.

Nearly a month ago, the regulator introduced new changes intended to protect consumers in the securities trading industry. Among those changes, the SEC wants broker-dealers to separate customers' funds from their own and to calculate the cash owed to customers and other broker-dealers daily instead of weekly.

Protecting Consumers

According to a report by Finance Magnates, the regulator wants all the broker-dealers with net cash of at least USD $250 million to calculate the amount of money they owe to customers daily and deposit the cash in reserves. Thus, the watchdog expects to protect the interest of consumers should a broker-dealer fail.

The latest warning arrived amid heightened scrutiny against broker-dealers operating in the US. In April, the regulator issued similar warnings highlighting the need for broker-dealers to implement proper policies on safeguarding customer records and information at their branch offices.

"While many of the (broker-dealers) have implemented written policies and procedures at their main office, some firms did not adopt or implement written policies and procedures that address safeguards for their branch offices despite the existence of the same or similar risks," the SEC said.