Reported by the U.S. Securities and Exchange

The 2025 SEC Examination Priorities document outlines the Division of Examinations’ key focus areas for ensuring compliance, preventing fraud, and maintaining market integrity. The highlights on fraud and money laundering are summarized below:

1. Investment Advisers and Fraud Risk: The SEC emphasizes adherence to fiduciary standards, requiring investment advisers to act in their clients’ best interest and disclose conflicts of interest. Examinations will focus on high-risk areas such as recommendations involving high-cost or illiquid products, financial conflicts of interest, and non-standard fee arrangements. Additionally, compliance programs are scrutinized for addressing risks like improper fee calculations or inadequate valuation methods for illiquid assets.

2. Private Funds and Transparency: Advisers to private funds are under close watch for accurate fee and expense allocations, conflict disclosures, and adherence to fiduciary obligations, especially during market volatility. Examinations will assess whether advisers meet compliance requirements for new SEC rules and Form PF amendments, with a particular focus on transparency in marketing and financial practices.

3. Broker-Dealers and Investor Protection: Broker-dealer practices under Regulation Best Interest are being evaluated to ensure they do not place the brokers’ interests above those of customers. Examinations target complex and high-risk products like crypto assets and non-transparent investments. Furthermore, broker-dealers must demonstrate effective conflict mitigation strategies and robust disclosures of fees and risks.

4. Anti-Money Laundering (AML) Programs: The SEC highlights the importance of AML compliance, including customer identification, due diligence, and suspicious activity monitoring. Examinations will assess if financial institutions have tailored their AML programs to address risks associated with their specific business models, filed appropriate Suspicious Activity Reports (SARs), and monitored compliance with the Office of Foreign Assets Control (OFAC) sanctions.

5. Crypto Assets and Fraud Prevention: Crypto-related examinations will review whether registrants offering these services comply with applicable standards, especially for products involving retail investors or retirement assets. This includes evaluating custody practices, valuation procedures, and Bank Secrecy Act compliance. Risks from blockchain technology, including asset security and operational resiliency, are also scrutinized.

6. Emerging Technologies and AI Risks: The SEC is concerned about how artificial intelligence and digital engagement practices impact fraud prevention, AML processes, and operational controls. Examinations will check whether registrants’ disclosures about AI capabilities are accurate and whether adequate safeguards and policies are in place to prevent misuse or data breaches.

7. Regulatory Coordination and Proactive Monitoring: A data-driven approach is being used to identify high-risk entities for examinations. The Division of Examinations collaborates with other regulators to assess evolving risks such as illicit trading practices, market manipulation, and money laundering schemes across the financial ecosystem. Enhanced oversight aims to strengthen transparency and investor protection.

These priorities reflect the SEC’s focus on adapting to technological and market changes to prevent fraud, enforce compliance, and mitigate money laundering risks.

Read full report: https://www.sec.gov/newsroom/press-releases/2024-172