AML programs should be tailored to business models

"Brokerage firms' AML programs must be tailored to their business models," said Susan L. Merrill, executive vice president and chief of enforcement at US-based regulatory agency, FINRA (Financial Industry Regulatory Authority). Merrill was commenting on the $1 million fine it recently imposed against E*Trade Securities, LLC and E*Trade Clearing, LLC, collectively, for failing to establish and implement anti-money laundering (AML) policies and procedures that could reasonably be expected to detect and cause the reporting of suspicious securities transactions.

While E*Trade provided trading customers with online electronic access to the securities markets, according to FINRA, it did not apply the same levels of automation when it came to monitoring trading acccounts for suspicious or "manipulative" trading activity.

According to FINRA, E*Trade relied on its analysts and other employees to manually monitor for and detect suspicious trading activity without providing them with sufficient automated tools, which was deemed to be insufficient given E*Trade's online business model, which requires "computerized surveillance of account activity to detect suspicious transactions and activity."

Financial service providers have invested millions in automated solutions for detecting suspicious account activity, but AML is still largely viewed as a 'box ticking' exercise, with some academics questioning the large number of Suspicious Activity Reports that have been generated, with few resulting in actual prosecutions.

The British Bankers Association has previously said that law enforcement officials need to take AML more seriously by following up on reports and information gathered by banks whilst monitoring account activity.