by Pam Martens and Russ Martens, Wall St On Parade:

There’s a guy in Manhattan who’s sleeping about as well as Michael Cohen these days. That’s the broker at Morgan Stanley Smith Barney who opened the brokerage account for Donald Trump’s lawyer, Michael Cohen. According to a document posted at the Twitter page of Michael Avenatti, the lawyer for porn star Stormy Daniels, this fellow may have some explaining to do to the Feds if he didn’t file a Suspicious Activity Report (SAR) with the U.S. Treasury’s Financial Crimes Enforcement Network, known on the street as FinCEN.

Avenatti’s document shows the following regarding a Morgan Stanley Smith Barney account:

“From July 13, 2017 through September 8, 2017, Mr. Cohen deposited three checks in the amounts of $505,000, $250,000, and $250,000 in his Morgan Stanley account.

“Each deposit was remitted from an account held at First Republic Bank in the name of Essential Consultants, LLC.”

Essential Consultants LLC is the account from which Cohen made the payment of $130,000 in hush money to Stormy Daniels. It is also the account that was receiving over $3 million in corporate funds, including more than $1.6 million from two foreign companies and a company linked to the Russian oligarch Viktor Vekselberg, now on a U.S. sanctions list and closely tied to Russian president Vladimir Putin.

Brokers on Wall Street are required to thoroughly understand the “Know Your Customer” rule. That means they must thoroughly understand how the client is earning the money he is depositing into the account to make sure it is coming from a legitimate source. Brokers must also take continuing education classes to stay abreast of the latest regulatory interpretations of the Know Your Customer rule and the anti-money laundering statutes.

If there is any one point that these continuing education courses overly emphasize, it is that the broker needs to be on extra high alert if their client is politically connected or a foreign entity. Obviously, that’s to guard against the potential for washing money.

FinCEN guidelines require that a Suspicious Activity Report must be filed where funds are suspected of involving any of the following circumstances:

“Involves funds derived from illegal activity or is intended or conducted in order to hide or disguise funds or assets derived from illegal activity (including, without limitation, the ownership, nature, source, location, or control of such funds or assets) as part of a plan to violate or evade any Federal law or regulation or to avoid any transaction reporting requirement under Federal law or regulation;

“Is designed, whether through structuring or other means, to evade any requirement of 31 CFR Chapter X or any other regulation promulgated under the Bank Secrecy Act, Public Law 91-508, as amended, codified at 12 U.S.C 1829b, 12 U.S.C. 1951-1959, and 31 U.S.C. 5311-5332;

“Has no business or apparent lawful purpose or is not the sort in which the particular customer would normally be expected to engage, and the financial institution knows of no reasonable explanation for the transaction after examining the available facts, including the background and possible purpose of the transaction, or

“Involves the use of the financial institution to facilitate criminal activity.”

Would a major U.S. financial institution ever actually facilitate criminal money laundering? The best person to ask about that is former Senator Carl Levin who previously chaired the U.S. Senate’s Permanent Subcommittee on Investigations and took a hard look at the matter in the late 1990s.

Morgan Stanley Smith Barney resulted from Smith Barney being bought in several transactions by Morgan Stanley beginning in 2009 and finalizing in 2012. Morgan Stanley is one of the largest investment banks and brokerage firms on Wall Street. Smith Barney had been the brokerage subsidiary of Citigroup, parent of the large commercial bank, Citibank.

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