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Regulatory Sanctions

‘If You See Something, Say Something’ - Detecting a Bank Secrecy Act Violation

April 28, 2017

A veteran broker recently agreed to a deferred fine of $10K and a 2-year suspension to settle FINRA charges that he made cash withdrawals from his personal bank account that were structured in amounts just below $10,000 in a manner designed to evade the bank’s federal reporting requirements – i.e., to prevent the filing of a CTR, or currency transaction report.


My first inclination was to wonder aloud why an individual should not be permitted to withdraw large amounts of money from his personal savings account. Stated another way, what authority did FINRA have over the personal activities of this (registered) individual? Read on…


BACKGROUND.    Ronald Reid, a resident of La Habra Heights, CA, entered the securities industry in 1984 with Dean Witter Reynolds and its successor, Morgan Stanley. He remained employed by and associated with Morgan Stanley until February 24, 2015, until he was U5'd by Morgan Stanley, based on “allegations involving personal cash withdraws from mr. reid's personal accounts below the currency transaction reporting amount. there are no allegations by the firm of any sales practice violations.”


And FINRA confirms in this case that Mr. Reid has no prior relevant disciplinary history in the securities industry.


Needless to say, the 2-year suspension essentially ends Mr. Reid’s financial services career.


FACTS AND VIOLATIVE CONDUCT PER FINRA.    On multiple occasions during the period from January 2012 to May 2014 Reid made cash withdrawals from his personal bank account that were structured in amounts just below $10,000 “for the purpose of causing the banks to fail to file of a Currency Transaction Report ("CTR''). All told, during the 29-month period, Reid made 23 cash withdrawals totaling $218,000 from his personal bank account, in the amounts of $9,000 or $9,500..


While FINRA notes that the withdrawals did not involve client funds nor were clients impacted in anyway, Reid violated FINRA Rule 2010 by intentionally making cash withdrawals in a manner designed to prevent the filing of a CTR.


Section 5324(a) of the Bank Secrecy Act (‘BSA’) provides that no person shall, for the purpose of evading federal reporting requirements, … structure or assist in structuring any transaction with one or more domestic financial institutions, or attempt to do so.


Structuring occurs when an individual conducts, or attempts to conduct, one or more transactions in currency, in any amount, at one or more financial institutions, on one or more days, in any manner, for the purpose of evading reporting requirements under the regulations. The phrase "in any manner" includes the breaking down of a single mm of currency exceeding $ 10,000 into smaller sums at or in the below $10,000, as well as conducting a series of currency transactions at or below $10,000. A violation of the BSA and the related regulations constitutes a violation of FINRA Rule 2010.


FINANCIALISH COMMENTARY.    As much as we’d like to rally behind Mr. Reid’s rights as a private citizen, we must presume that he did not have a very compelling explanation for his actions. One the one hand, it’s not unusual for a person in his position to have the need to withdraw $218,000 over a 2-1/2 year period. One the other hand, doing so in increments just short of $10,000 each, broadcasts a suspicious nature to his activities (or to Mr. Reid, himself).


The securities industry simply cannot employ individuals who pose a potential threat to themselves and their firm’s clients. And so, we concur with the philosophy that, “IF YOU SEE SOMETHING, SAY SOMETHING,” even if it means ending one’s career.


This case was reported in FINRA Disciplinary Actions for April 2017.

For details on this case, go to … FINRA Disciplinary Actions Online, and refer to Case #2015044663901.