A broker-dealer settled FINRA charges for failing to implement an AML program tailored to the broker-dealer's retail business.
In a Letter of Acceptance, Waiver, and Consent, FINRA alleged that the broker-dealer's AML procedures did not:
- include a risk-based customer identification program tailored to its customer base;
- discuss any exception reports that could be used for the identification of suspicious transaction red flags;
- provide a description of how to perform additional monitoring for accounts in which suspicious trading was detected;
- explain the manner and frequency in which foreign accounts should be monitored; or
- include any policies regarding the documentation of its investigations into potentially suspicious activity.
Additionally, FINRA stated that the broker-dealer did not timely detect or address suspicious trading (e.g., high volumes of unrelated purchases of low-priced, low-volume securities, high order-cancellation rates and high levels of account activity with very low levels of transactions) by non-U.S. customers. FINRA found that the broker-dealer also inappropriately and unreasonably relied on the manual review of trade blotters and daily money movement reports to detect suspicious activity, which resulted in a failure to identify trading patterns across accounts or lasting for more than one day.
As a result of the broker-dealer's AML failures, FINRA determined that the broker-dealer violated FINRA Rules 3310 ("Anti-Money Laundering Compliance Program") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the broker-dealer agreed to (i) a censure, (ii) a $250,000 fine and (iii) an undertaking to hire an independent consultant to conduct a thorough review of the broker-dealer's policies, systems and procedures.
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.