The SEC charged E*Trade Clearing LLC and E*Trade Securities LLC (collectively, "E*Trade") for failing to comply with an AML rule that requires B/D's to verify the identities of their customers and document their procedures for doing so.
E*Trade failed to accurately document certain CIP practices and verify the ID's of more than 65,000 of it customers, as required by the USA PATRIOT Act and SEC rules. E*Trade will pay $1mn in penalties. Cheryl Scarboro, Associate Director of SEC's Enforcement Div., noted: "On several occasions, E*Trade personnel discovered and rediscovered its CIP deficiency. However, E*Trade did not initiate any corrective action until the problem resurfaced almost 2 years after the compliance deadline."
SEC Findings. E*Trade established, documented and maintained a CIP that specified that it would verify all accountholders in a joint account. However, during a 20-month period, the firm failed to follow those procedures - the firm did not verify the ID's of secondary account holders in newly opened joint accounts. 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. E*Trade has since conducted CIP procedures for all of its overlooked joint account holders. [SEC PR 8-156, 7/30]
Comments