Securities regulators are investigating Charles Schwab and Merrill Lynch over whether they are doing enough to police their clients’ identities, sources said, a sign a crackdown on money-laundering is expanding, two sources told Reuters on Wednesday.
Specifically, the regulators are looking into whether the brokerages missed red flags that could indicate attempts to move money illicitly or to feed proceeds from illegal activities into the financial system, the sources said…
…The SEC’s investigation so far has found Charles Schwab and Merrill did not pay close enough attention to their clients’ true identities, and accepted shell companies and individuals with fake addresses as clients, two sources said.
In both cases, some of the accounts, whose ownership the brokerages did not adequately investigate, were eventually linked to drug cartels, they said. One of Charles Schwab’s clients, a rancher in Texas, was found to be transferring money to a holding company that was revealed to be a shell company, according to one of the sources.
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