Broker-Dealer Settles FINRA Charges for AML Program Failures

A broker-dealer settled FINRA charges for failing to maintain an anti-money laundering ("AML") program reasonably designed to detect and cause the reporting of suspicious activity and for failing to conduct required customer due diligence.

According to the AWC, the firm failed to detect or investigate potentially suspicious money movements during the relevant period. FINRA stated that the firm relied on an automated surveillance system to identify potential suspicious activity, but the system’s exception reports failed to capture numerous red flags set out in regulatory guidance, including on third-party wire transfers and transactions involving high-risk jurisdictions. FINRA found that the firm also failed to review the exception reports that were generated in a timely manner, with some reports going unreviewed for months. 

FINRA also determined that the firm processed widespread securities transactions and money movements without adequate AML scrutiny. FINRA said that, while the firm serviced approximately 310,000 accounts, it did not assign risk profiles to its domestic customers and failed to designate foreign accounts as high-risk during the relevant period. FINRA found the firm failed to subject these accounts to appropriate risk-based monitoring. As a result, FINRA said the firm failed to establish, maintain, and enforce written policies and procedures reasonably designed to conduct ongoing customer due diligence.

FINRA concluded that the firm violated FINRA Rules 3310 ("Anti-Money Laundering Compliance Program") and 2010 ("Standards of Commercial Honor and Principles of Trade").

The firm agreed to (i) a censure, (ii) a $650,000 fine, and (iii) an undertaking to remediate its AML program.