Broker-Dealer Settles Charges for AML Reporting Failures

A broker-dealer settled FINRA charges for failing to tailor its AML program to monitor for and report potentially suspicious activity.

According to FINRA, the broker-dealer's supervisory controls relied on a single compliance officer to review all alerts generated by the firm's automated third-party surveillance system and to determine the validity of the report. FINRA found that the designated compliance officer had no prior AML supervisory experience, nor did the broker-dealer's policies offer any guidance to help determine if a report should be shared with the firm's alert review committee or if a suspicious activity report ("SAR") needed to be filed.

FINRA found that the broker-dealer implemented a "three-strike" policy that reprimanded traders after each of three "valid" alerts, but generally only considered filing an SAR after receiving a third alert, which also resulted in the revocation of the trader's access to the firm's platform. FINRA said that even after transitioning to a single strike system that terminated access after one alert, the broker-dealer repeatedly failed to consider filing an SAR after an alert was generated. FINRA said that the broker-dealer also failed to consider filing an SAR in instances where a trader's access termination was based on a notice from a regulator or executing broker.

FINRA determined that the broker-dealer violated FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade") and Rule 3310 ("Anti-Money Laundering Compliance Program"). As part of the settlement, the broker-dealer agreed to (i) a censure, (ii) a civil monetary penalty of $45,000 and (iii) undertakings to remediate its supervisory deficiencies relating to its AML program.