Merrill Lynch has agreed to enter into a cease-and-desist order and pay a fine totaling $26 million after failing to identify suspicious money-transfer activities in customer accounts nationwide.
The Securities and Exchange Commission and the Financial Industry Regulatory Authority each fined the firm $13 million as a result of the b-d’s alleged failures to detect and report suspicious banking activity in billions of dollars of transactions.
The SEC said in its cease-and-desist order that from at least 2011 to 2015, Merrill Lynch “failed to adequately monitor, detect and report certain suspicious activity related to transactions or patterns of transactions in its customers’ accounts.”
Merrill’s underlying anti-money laundering system and its parent Bank of America’s system also failed to recognize suspicious activities of high-risk customers in part because of a failure to link accounts under common ownership, Finra said in its censure of the firm.
Merrill Lynch made the decision to exclude transactions of more than $22 billion in retirement and managed accounts and accounts involving securities-based loans from its AML monitoring system, the SEC alleged in its order. The accounts experienced “significant” activity in 2.5 million transactions in 2013 alone, the SEC said.
The SEC also found that Merrill Lynch made the decision to exclude approximately 12 million transactions that moved approximately $105 billion to and from accounts at Merrill Lynch, via checks, ATM withdrawals, cash deposits, wires and ACH transactions from 2011 through 2013.
For example, the SEC alleged, accounts at the San Diego, Calif., Merrill Lynch branch that served non-resident customers engaged in unreported suspicious transactions that included:
• Patterns of large currency deposits through ATMs to fund off-shore company accounts where there was no apparent business reason;
• Accounts that engaged in complicated movements of large, even-dollar-denominated funds, through patterns of internal journal-entry transfers and deposits and withdrawals to and from accounts at third-party institutions in high-risk jurisdictions;
• Customers withdrawing currency via debit-card cash advances and ATM withdrawals in long-term patterns with indicia used in attempts to evade currency transaction report filings.