John Zasada, Compliance Consulting Director, Financial Institutions Group

On May 12, 2021, the Securities and Exchange Commission (SEC) announced a $1.5 million penalty against GWFS Equities Inc. (GWFS) for improper filing of Suspicious Activity Reports (SARs).

GWFS is a Colorado-registered broker-dealer and an affiliate of Great-West Life & Annuity Insurance Company.

Broker-dealers, similar to banks and credit unions, are required to file SARs for certain transactions suspected to involve fraudulent activity or a lack of an apparent business purpose. Between September 2015 and October 2018, GWFS was aware of attempts by third-party bad actors to gain access to the retirement accounts of individual plan participants. Furthermore, the broker-dealer was aware of these improper access attempts and failed to file approximately 130 SARs that were required to be filed for these attempts.

Broker-dealers are required to include narratives in SARs containing the five essential elements of information (who, what, when, where and why) of the suspicious activity being reported. For approximately 300 SARs filed by GWFS, the SEC indicated the five essential elements of SAR information, including cyber data such as URL addresses and IP addresses, were not included. Excluding these five elements in SARs deprived law enforcement of critical information, including cyber-related unauthorized account access details.

To learn more about SARs compliance requirements, contact Doeren Mayhew’s regulatory compliance specialists.