Firm Settles FINRA Charges for AML Program Failures

A firm settled FINRA charges for failing to implement adequate systems to review suspicious activity in customer accounts, conduct independent testing of its AML program and provide reasonable training to employees responsible for implementing the program.

In the Letter of Acceptance, Waiver and Consent, FINRA said that the firm did not develop and implement reasonable escalation and tracking procedures regarding potentially suspicious customer trading in order to determine whether the activity should be reported to FinCEN, including the factors to consider or the process that should be followed. FINRA found that the firm's analysts often closed alerts with no further action or documentation.

FINRA said that the (i) firm did not outline the review, approval and post-approval processes for the deposit and resale of low-priced securities, (ii) firm's procedures failed to specify individual responsibilities for these processes and (iii) the firm's procedures incorrectly stated that the Compliance department was responsible for ensuring adherence to Section 5 of the Securities Act, when this duty had been transferred to the Trading Operations department.

As a result, FINRA found that the firm violated FINRA Rule 3110(a) ("Supervision"), FINRA Rule 2010 ("Standards of Commercial Honor and Principles of Trade").

The firm agreed to (i) a censure; (ii) a $700,000 fine and (iii) to undertake remediation of the supervisory and compliance issues identified.