SEC Orders Crowell, Weedon to Comply With Anti-Money Laundering Law
FOR IMMEDIATE RELEASE
Washington, D.C., May 22, 2006 - In its first-ever enforcement action under the USA PATRIOT Act, the Securities and Exchange Commission announced today that it has sanctioned Los Angeles broker-dealer Crowell, Weedon & Co. for failing properly to document its customer identification program. The USA PATRIOT Act seeks to protect the U.S. financial system from money laundering and terrorist financing by, among other things, requiring broker-dealers to implement and document identity verification procedures for all new accounts.
From October 2003 to at least late April 2004, Crowell, Weedon failed to document its actual customer identity verification procedures in its written customer identification program (CIP). During this period, the firm opened approximately 2,900 new accounts for customers. In verifying the identities of those customers, Crowell, Weedon simply relied on its registered representatives' attestations that they had personal knowledge of the customers opening the new accounts. This practice was not documented in the firm's written CIP.
Rather, Crowell, Weedon's written CIP specified that it would verify the identity of each new customer using certain non-documentary and documentary procedures, such as a public database search and reviewing a government issued identification. As stated above, the firm did not use these procedures; instead, it used procedures that were materially different from, and weaker than, those in its written CIP. By failing accurately to document its CIP, Crowell, Weedon violated the record-keeping and record retention requirements under the CIP rule.
Linda Chatman Thomsen, Director of the SEC's Enforcement Division, stated, "The USA PATRIOT Act imposes important obligations on broker-dealers to protect against money laundering and terrorist financing. This action demonstrates the Commission's commitment to enforce laws within its jurisdiction that are designed to prevent and detect money laundering and related activities."
Randall R. Lee, Regional Director of the Commission's Pacific Regional Office, said, "The USA PATRIOT Act's customer identification program requirement is a significant tool for deterring money laundering and other activities that could be used to benefit terrorist groups. Enforcement of this requirement is a significant part of the Commission's overall mission, and the Commission is committed to doing its part to protect our homeland."
Without admitting or denying any of the findings, Crowell, Weedon consented to the issuance of an order that it cease and desist from committing or causing any violations and any future violations of Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 thereunder.
Section 17(a) of the Securities Exchange Act of 1934 and Rule 17a-8 require a broker-dealer to comply with certain record-keeping requirements under the Bank Secrecy Act, as amended by the USA PATRIOT Act. The Bank Secrecy Act rules require a broker-dealer to make and keep certain reports and records to facilitate the prevention, detection, and prosecution of international money laundering and the financing of terrorism. These rules require a broker-dealer to establish, document, and maintain procedures for verifying the identities of customers opening new accounts.
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For further information contact:
Randall R. Lee
Pacific Regional Office
Kelly C. Bowers
Senior Assistant Regional Director
Pacific Regional Office
Additional materials: Administrative Proceeding No. 34-53847