A firm and its principal settled FINRA charges for failing to establish an adequate AML program and a supervisory system.

In a Letter of Acceptance, Waiver, and Consent, FINRA found that, although there was a principal responsible for monitoring the firm's AML compliance and reviewing red flags, the firm's AML procedures did not provide guidance regarding how that principal was to identify or review red flags. FINRA stated that the firm's review for potentially suspicious transactions was limited to that principal's manual review, even though that principal had no experience with the customer account business and the firm and its principal were aware of that principal's inexperience. Additionally, the firm's clearing firm contacted it on multiple occasions regarding suspicious transactions, but the notifications did not prompt action on the firm's part.

In addition, FINRA found that the responsible principal "repeatedly" permitted deposits and re-sales of microcap securities despite missing documentation.

As a result, the firm and its principal violated FINRA Rules 3310(a) ("Anti-Money Laundering Compliance Program"), 3110(a) ("Supervision") and 2010 ("Standards of Commercial Honor and Principles of Trade") .

To settle the charges, the firm agreed to (i) a censure and (ii) a $100,000 fine, and the principal agreed to (i) a two-month suspension, (ii) a $15,000 fine and (iii) undertaking to complete 16 hours of AML-related continuing education.

Primary Sources

  1. FINRA AWC: Alternative Execution Group; Richard Alter

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.