What is a regulator’s favorite snack? Low hanging fruit: the recent Risk Alert from the SEC’s Division of Examinations concerning Suspicious Activity Reporting (SAR) for Broker-Dealers indicates a cornucopia. Some examples found by the Division:
– Firms failing to report as suspicious large deposits of low-priced securities that were immediately followed by liquidation of those positions and wiring out of the proceeds
– Firms failing to report noticeable customer sales of shares occurring simultaneously with explicit promotional activity
– Firms failing to tailor red flags to address risks associated with trading activity commonly engaged in by customers
– For cyber-intrusions, firms failing to include in a SAR known details concerning the nature of the scheme, including theft of assets or funds

Periodic check ups on policies, procedures, governance and systems surrounding SAR reporting are a key means of avoiding the consequences of a deficiency letter or enforcement action.  The alert is here:

https://www.sec.gov/files/aml-risk-alert.pdf