Suspicious Activities Report Timing and DB

Deutsche Bank Securities, the registered broker-dealer subsidiary of Deutsche Bank AG, had to pay a$4 million fine for failing to file suspicious activities reports.

This year is the year that registered investment advisers need to get fully on the bandwagon with the Bank Secrecy Act. FinCEN promulgated the Investment Adviser Rule to spread the Bank Secrecy Act requirements. While most investment advisers are doing some form of AML-CFT reviews, the process is now subject to explicit regulatory requirements. The compliance date is January 1, 2026.

The BSA’s implementing regulations require the filing of a SAR within 30 calendar days after the date of the broker-dealer’s initial detection of facts that may constitute a basis for filing a SAR unless no suspect has yet been identified, in which case the broker-dealer has an additional 30 days to file the SAR. See 31 C.F.R. § 1023.320(b)(3). Broker-dealers are generally permitted a period of time for an “appropriate review” before the 30-day clock begins to run, but are directed to begin that review “promptly” and complete it within a “reasonable period of time.” The SAR Activity Review – Trends, Tips & Issues, Issue 15 – In Focus: The Securities and Futures Industry, FinCEN (May 2009).

So what can we learn from what DB did wrong.

DB failed to promptly conduct reviews of some potentially suspicious activity resulting in untimely SAR filings on multiple occasions. DB’s polices required the completion of investigations of potentially suspicious activity in “no longer than 60 calendar days” once the matter went into the review queue.

DB also had an Anti Financial Crime team tasked with reviewing law enforcement or regulatory outreach to assess whether such outreach potentially involved suspicious activity for purposes of SAR filing. However, DB did not apply the “standard” timeframe of 60 days to matters that came in through this process.

As a result DB had a bunch of untimely SAR filings.

In one such example of an untimely filed SAR, DBSI filed a SAR in November 2023 identifying as suspicious 68 transactions totaling nearly $2 billion related to an entity associated with a request from a regulator that DBSI received more than two years earlier.

and

In another example, in November 2021, DBSI received a request from law enforcement in connection with a former client who was also sued in March 2022 in a private civil fraud case, but DBSI nevertheless failed to file a SAR identifying 28 transactions as suspicious until March 2024.

And to top it off, the SEC said that DB under-staffed its AML function. That lead to backlogs in reporting.

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