Broker-Dealer Settles FINRA Charges for AML Program Failures

A broker-dealer settled FINRA charges for failing to implement an adequate AML program for the firm's penny stock business.

According to the FINRA Letter of Acceptance, Waiver and Consent ("AWC"), the broker-dealer and its former affiliate failed to (i) monitor transactions in penny stocks or securities that were traded outside of traditional exchanges; (ii) confirm that sales of penny stocks fell within an applicable exemption from registration under the Securities Act of 1933; (iii) conduct reviews of foreign currency wire transfers, including transfers involving high-risk entities and jurisdictions; and (iv) provide personnel with the necessary information to identify and report potentially suspicious transactions. FINRA found that even though the firms were made aware of deficiencies in their AML Program, they failed to improve their procedures for approximately three years, or to provide adequate resources for the firms' AML Program.

Additionally, FINRA stated that one of the broker-dealers failed to comply with closeout and pre-borrow requirements of Rule 204 of Regulation SHO.

To settle the charges, the firm agreed to (i) a censure, (ii) a fine of $15 million, and (iii) undertake to adopt procedures to comply with FINRA Rule 3310 (AML Compliance Program).