Broker-Dealer Settles FINRA Charges for AML and Customer Due Diligence Failures

A broker-dealer settled FINRA claims that its AML program was insufficient and that it lacked risk-based procedures for conducting ongoing customer due diligence.

According to the AWC, the firm became self-clearing in October 2019 but did not build a surveillance system to replace the AML surveillance reports it had received from its former clearing firm. FINRA said the firm's procedures identified many types of warning signs but did not have policies or procedures in place stating how or when to act on them. FINRA found that in practice, the firm used only one type of report on wire activity, which was reviewed on a sporadic and unsystematic basis.

FINRA also faulted the firm's customer due diligence, stating it relied on incomplete risk profiles inherited from its former clearing firm without building full profiles or keeping them current. As a result, the firm could not judge whether potentially suspicious customer transactions were consistent with the customer's profile.

From October 2019 through July 2023, the firm's conduct violated FINRA Rules 3310(a) (AML Compliance Program), 3310(f), and 2010 (Standards of Commercial Honor and Principles of Trade), according to the AWC. FINRA said the firm began to remediate its AML program in August 2023.

The firm agreed to a censure and a $145,000 fine.