According to Reuters, two of the country's largest financial institutions are currently being investigated by regulators determined to ascertain whether they fulfilled all of their KYC requirements.
Charles Schwab Corp and Bank of America Corp's Merrill Lynch are both being probed in an effort to determine how much research they did into the background of their customers. Reuters notes that this sort of activity is a near-certain indicator that a crackdown on AML compliance is forthcoming.
In particular, the SEC is poring into red flags potentially missed by the financial institution, oversights that could have allowed criminal elements to move money illegally or introduce ill-gotten gains from drug trafficking into a legitimate financial system.
Sources cited by Reuters noted that both institutions accepted funds from shell companies and individuals with fake addresses. In Schwab's case, the majority of those suspected are from near the Mexican border, strengthening the possibility that there are ties to drug cartels.
Some of the accounts contained balances that stretched into the millions of dollars.
For its part, Schwab has opened up an internal investigation into the claims, though it declined to comment when approached by Reuters. It remains to be seen what charges, if any, will be filed against the institutions or the individuals therein, and what penalties would subsequently be levied.
What this investigation does show is that there is no room for complacency in AML compliance. Any system an institution has in place for monitoring suspicious transactions has to be sufficiently sophisticated to ensure adherence to all regulations. It is much better to upgrade this software voluntarily than under pressure from an SEC investigation.
