Firm Settles FINRA Charges for AML Program Deficiencies
Commentary by Kevin Harnisch
A firm settled FINRA charges for anti-money laundering ("AML") compliance failures related to its suspicious activity monitoring and training obligations.
According to the AWC, the firm's WSPs incorrectly stated it had no obligation to monitor for suspicious activity since it lacked retail brokerage accounts. FINRA emphasized that the firm was required to monitor investment banking and M&A transactions, and that it disregarded 2020 SEC detailed guidance advising "each broker-dealer that when developing an AML program, it should tailor the program to fit its business, taking into consideration, among other factors, 'the types of transactions in which its customers engage.'"
FINRA found that the firm's AML procedures were misaligned with its business, using generic red flag warnings for retail brokerage firms instead of investment banking and M&A. FINRA found that the firm also failed to address AML risks for marijuana-related businesses.
In addition, FINRA said that the firm's AML training omitted risks tied to its actual business and cannabis-related transactions, and instead focused on retail brokerage accounts that it does not maintain.
FINRA determined that the firm violated FINRA Rules 3310 ("Anti-Money Laundering Compliance Program") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure, (ii) pay a $50,000 fine and (iii) certify that it has remediated its AML deficiencies and implemented an adequate supervisory system.
Commentary
All broker-dealers must have AML policies irrespective of their customer base. Not only must those policies and procedures be specifically tailored to the nature of the firm’s business, but this AWC is a reminder of the type of minutia that FINRA expects to be included, including guidance on how to detect or monitor for suspicious transactions and how to conduct and document a review of a purported red flag.