SEC Risk Alert Highlights Observations From Anti-Money Laundering Compliance Examinations of Broker-Dealers

SEC exam staff highlights issues regarding independent testing and personnel training, customer identification, due diligence and beneficial ownership requirements, and OFAC compliance

On July 31, 2023, the Division of Examinations (the “Division”) of the U.S. Securities and Exchange Commission published a risk alert (the “Alert”) highlighting observations from examinations of broker-dealers regarding their compliance with certain key anti-money laundering (“AML”) obligations. Specifically, the Alert discusses the Division’s observations relating to independent testing of firms’ AML programs and training of their personnel, Customer Identification Programs, as well as Customer Due Diligence and beneficial ownership requirements. Moreover, the Division observed weaknesses in firms’ Office of Foreign Assets Control (“OFAC”) compliance programs. The Alert emphasizes the importance of firms dedicating sufficient resources (including staffing) to the performance of AML and sanctions compliance functions, particularly in the current environment of new and increasing sanctions imposed by OFAC against individuals and entities.

This Legal Update provides a brief summary of the Division's observations.