Post by Sapphire Capital on Aug 3, 2008 2:50:46 GMT 4
SEC Slams E*Trade on Patriot Violations
By Ed Zwirn
The Securities and Exchange Commission has charged E*Trade Clearing LLC and E*Trade Securities LLC for failing to comply with USA Patriot Act and SEC anti-money laundering rules, which require broker-dealers to verify the identities of their customers and document their procedures for doing so.
According to the SEC, from October 2003 to June 2005, E*Trade did not verify the identities of 65,442 secondary accountholders in joint accounts as required by the agency's Customer Identification Program rule and its own procedures and has agreed pay $1 million in financial penalties.
"E*Trade is one of the largest online brokerage firms in the world, and a compliance lapse of this type has the potential to undermine the nation's anti-terrorism and anti-money laundering efforts," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement.
"On several occasions, E*Trade personnel discovered and rediscovered its CIP deficiency,” Cheryl Scarboro, associate director in the SEC's Division of Enforcement, added. “E*Trade's 20-month period of noncompliance clearly resulted from a disjunctive organizational structure and inadequate management of its CIP responsibilities."
The SEC's order further found that “E*Trade's compliance failure was systemic, resulting from lack of a cohesive organizational structure, lack of adequate management oversight, and miscommunications among personnel in several E*Trade business groups.”
In addition to the financial penalties, E*Trade agreed to a censure and to retain a qualified independent compliance consultant to verify the adequacy of its CIP rule compliance program.
In advance of settling this matter, E*Trade stated that it submitted the secondary accountholder information on joint accounts originally missed to its third-party vendor for verification. According to E*Trade, the verification process did not identify any joint accounts that should not have been opened.
By Ed Zwirn
The Securities and Exchange Commission has charged E*Trade Clearing LLC and E*Trade Securities LLC for failing to comply with USA Patriot Act and SEC anti-money laundering rules, which require broker-dealers to verify the identities of their customers and document their procedures for doing so.
According to the SEC, from October 2003 to June 2005, E*Trade did not verify the identities of 65,442 secondary accountholders in joint accounts as required by the agency's Customer Identification Program rule and its own procedures and has agreed pay $1 million in financial penalties.
"E*Trade is one of the largest online brokerage firms in the world, and a compliance lapse of this type has the potential to undermine the nation's anti-terrorism and anti-money laundering efforts," said Linda Chatman Thomsen, director of the SEC's Division of Enforcement.
"On several occasions, E*Trade personnel discovered and rediscovered its CIP deficiency,” Cheryl Scarboro, associate director in the SEC's Division of Enforcement, added. “E*Trade's 20-month period of noncompliance clearly resulted from a disjunctive organizational structure and inadequate management of its CIP responsibilities."
The SEC's order further found that “E*Trade's compliance failure was systemic, resulting from lack of a cohesive organizational structure, lack of adequate management oversight, and miscommunications among personnel in several E*Trade business groups.”
In addition to the financial penalties, E*Trade agreed to a censure and to retain a qualified independent compliance consultant to verify the adequacy of its CIP rule compliance program.
In advance of settling this matter, E*Trade stated that it submitted the secondary accountholder information on joint accounts originally missed to its third-party vendor for verification. According to E*Trade, the verification process did not identify any joint accounts that should not have been opened.