A firm settled FINRA charges for its failure to "reasonably tailor" its AML program for its "low-priced securities liquidation business."
In a Letter of Acceptance, Waiver and Consent, FINRA found that the firm's AML procedures did not set out (i) how to identify red flags, (ii) how, when and to whom to report red flags, or (iii) who were the personnel with authority to decide whether to file a suspicious activity report. Furthermore, FINRA stated, the firm "almost exclusively" reviewed daily trade blotters manually to identify suspicious activity, a practice that failed to identify patterns of activity over time, and that was unreasonable given the volume and complexity of the firm's business.
FINRA also found that the firm failed to:
- identify and report suspicious activity, including the activities of a customer that liquidated millions of shares of low-priced securities as part of an apparent pump-and-dump scheme;
- conduct adequate due diligence on correspondent accounts that the firm maintained for foreign financial institution ("FFI") customers;
- collect any information regarding the AML record of five FFI customers with correspondent accounts; and
- conduct timely, reasonable annual independent testing of its AML program for three consecutive years.
As a result, FINRA determined that firm violated FINRA Rules 3310 ("Anti-Money Laundering Compliance Program") and 2010 ("Standards of Commercial Honor and Principles of Trade").
To settle the charges, the firm agreed to (i) a censure, (ii) a $450,000 fine and (iii) an undertaking to establish reasonably designed policies, procedures and internal controls.
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