Update on SEC Action Against Broker Dealer to Comply With Anti Money Laundering Law
Last month, the SEC announced its first ever enforcement action under the USA PATRIOT Act, pursuant to which it sanctioned Los Angeles broker-dealer Crowell, Weedon & Co. for allegedly failing to properly document its customer identification program. The SEC noted that the USA PATRIOT Act seeks to protect the U.S. financial system from money laundering and terrorist financing by, among other things, requiring broker-dealers to implement and document identity verification procedures for all new accounts.
The SEC alleged that from October 2003 to at least late April 2004, Crowell, Weedon failed to document its actual customer identity verification procedures in its written customer identification program (CIP). During this period, the firm opened approximately 2,900 new accounts for customers. In verifying the identities of those customers, Crowell, Weedon apparently relied on its registered representatives' attestations that they had personal knowledge of the customers opening the new accounts. This practice was allegedly not documented in the firm's written CIP.
See the full SEC release here.
Subsequent media reports indicated that Crowell, Weedon settled the SEC action without admitting or denying the S.E.C.'s claims. In connection with the settlement, Crowell, Weedon indicated that it had "enhanced" its procedures for opening accounts and noted that there was no accusation that any account was used to launder money.