The SEC's Authority To Enforce The Bank Secrecy Act Is Challenged

In the past few years, the SEC has become increasingly active in bringing enforcement actions based on broker-dealers' alleged failures to comply with requirements of the Bank Secrecy Act (BSA), in particular that requirement that they file "Suspicious Activity Reports," or "SARs." The SEC's authority to bring such actions, however, has never been established by statute or appellate authority, and is being challenged in a petition for a writ of mandamus currently pending in the Second Circuit. Though the procedural posture of that case makes it an unlikely vehicle for resolving the question, the issue it raises is likely to recur so long as the SEC continues to bring such enforcement actions despite its lack of any clear authority to do so. Practitioners should be aware of this open issue so that it can be properly raised and preserved in BSA enforcement actions brought by the SEC.